Resource Apartment REIT III 10-Q 2019 Q2 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549  

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES   EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES   EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 000-55923

RESOURCE APARTMENT REIT III, Inc.

(Exact name of registrant as specified in its charter)

Maryland	47-4608249
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
1845 Walnut Street, 18th Floor, Philadelphia, PA, 19103
(Address of principal executive offices) (Zip code)
(215) 231-7050
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
n/a	n/a	n/a

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☑ No  ☐  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer.	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐ No ☑

As of August 6, 2019, there were 624,194 outstanding shares of Class A common stock, 1,102,338 outstanding shares of Class T common stock, 9,384,717 outstanding shares of Class R common stock and 626,319 outstanding shares of Class I common stock of Resource Apartment REIT III, Inc.

RESOURCE APARTMENT REIT III, INC.

INDEX TO QUARTERLY REPORT

ON FORM 10-Q

		PAGE
PART I	FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Consolidated Balance Sheets – June 30, 2019 (unaudited) and December 31, 2018	4
	Consolidated Statements of Operations and Comprehensive Loss - For the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)	5
	Consolidated Statements of Changes in Stockholders' Equity – Three and Six Months Ended June 30, 2019 and 2018 (unaudited)	7
	Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 2019 and 2018 (unaudited)	9
	Notes to Consolidated Financial Statements – June 30, 2019 (unaudited)	10
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	47
ITEM 4.	Controls and Procedures	47
PART II	OTHER INFORMATION
ITEM 1.	Legal Proceedings	48
ITEM 1A.	Risk Factors	48
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
ITEM 6.	Exhibits	51
SIGNATURES		52

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements.  Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.  In some cases, you can identify forward-looking statements by terms such as "anticipate," "believe," "could," "estimate," "expects," "intend," "may," "plan," "potential," "project," "should," "will" and "would" or the negative of these terms or other comparable terminology.  Actual results may differ materially from those contemplated by such forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.  We undertake no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances after the date of this report, except as may be required under applicable law.

The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

• We are dependent on Resource REIT Advisor, LLC (our "Advisor") to select investments and conduct our operations. We pay substantial fees to and expenses of our Advisor, its affiliates and participating broker-dealers, which payments increase the risk that our stockholders will not earn a profit on their investment.

• Our executive officers and some of our directors are also officers, directors, managers or key professionals of our Advisor, Resource Securities LLC (our "Dealer Manager") and other entities affiliated with Resource Real Estate, LLC (our "Sponsor"). As a result, these individuals face conflicts of interest, including significant conflicts created by our Advisor’s compensation arrangements with us and other programs sponsored by our Sponsor and conflicts in allocating time among us and these other programs. These conflicts could result in action or inaction that is not in the best interests of our stockholders.

• Our Advisor and its affiliates receive fees in connection with transactions involving the acquisition and management of our investments. These fees are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. This may influence our Advisor to recommend riskier transactions to us.

• There is no limit on the amount we can borrow to acquire a single real estate investment, but pursuant to our charter, we may not leverage our assets with debt financing such that our borrowings would be in excess of 300% of our net assets unless a majority of our independent directors find substantial justification for borrowing a greater amount.

• Based on sales volume to date, we expect to raise substantially less than the maximum offering amount in our initial public offering. Because we expect to raise substantially less than the maximum offering amount, we will not be able to invest in as diverse a portfolio of properties as we otherwise would, which will cause the value of our stockholders’ investment to vary more widely with the performance of specific assets, and cause our general and administrative expenses to constitute a greater percentage of our revenue. Raising fewer proceeds in our offering, therefore, increases the risk that our stockholders will lose money in their investment.

• Our charter permits us to pay distributions from any source without limitation, including from offering proceeds, borrowings, sales of assets or waivers or deferrals of fees otherwise owed to our Advisor. Distributions paid through June 30, 2019, have been funded in part with offering proceeds. Distributions funded from sources other than our cash flow from operations will result in dilution to subsequent investors, reduce funds available for investment in assets and may reduce the overall return to our stockholders.  In addition, to the extent these distributions exceed our net income or net capital gain, a greater proportion of your distributions will generally represent a return of capital as opposed to current income or gain, as applicable.

• We may experience adverse business developments or conditions similar to those affecting certain programs sponsored by our Sponsor, which could limit our ability to make distributions and could decrease the value of an investment in us.

• Our failure to qualify as a real estate investment trust for federal income tax purposes would reduce the amount of income we have available for distribution and limit our ability to make distributions to our stockholders.

All forward-looking statements should be read in light of the risks described above and identified in the "Risk Factors" section of our Registration Statement on Form S-11 (File No. 333-207740) filed with the Securities and Exchange Commission, as the same may be amended and supplemented from time to time.

3

PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

RESOURCE APARTMENT REIT III, INC.

CONSOLIDATED BALANCE SHEETS

	June 30, 2019			December 31, 2018
	(unaudited)
ASSETS
Investments:
Rental properties, net	$	197,997,091		$	136,061,586
Identified intangible assets, net		1,127,962			707,825
Total investments		199,125,053			136,769,411
Cash		30,338,228			32,827,390
Restricted cash		2,364,290			883,902
Tenant receivables, net		60,607			51,524
Due from related parties		5,380			13,772
Subscriptions receivable		110,000			1,431,000
Prepaid expenses and other assets		584,916			1,097,179
Deferred offering costs		4,795,010			5,046,364
Total assets	$	237,383,484		$	178,120,542
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage notes payable, net	$	145,419,265		$	100,044,640
Accounts payable and accrued expenses		1,277,151			1,167,901
Accrued real estate taxes		1,124,091			—
Due to related parties		12,944,582			12,993,287
Tenant prepayments		56,489			116,102
Security deposits		353,959			271,246
Distributions payable		1,315,781			1,037,799
Total liabilities		162,491,318			115,630,975
Stockholders’ equity:
Preferred stock, par value $0.01: 10,000,000 shares authorized, none issued and    outstanding		—			—
Convertible stock, par value $0.01: 50,000 shares authorized, issued and outstanding		500			500
Class A common stock, par value $0.01: 25,000,000 shares authorized, 623,238 and    634,493 issued and outstanding, respectively		6,232			6,345
Class T common stock, par value $0.01: 25,000,000 shares authorized, 1,099,414 and   1,111,394 issued and outstanding, respectively		10,994			11,114
Class R common stock, par value $0.01: 750,000,000 shares authorized, 9,294,218 and    7,181,534 issued and outstanding, respectively		92,942			71,815
Class I common stock, par value $0.01: 75,000,000 shares authorized, 614,262 and    329,604 issued and outstanding, respectively		6,143			3,296
Additional paid-in capital		98,271,812			77,896,470
Accumulated other comprehensive loss		(39,764	)		(40,633	)
Accumulated deficit		(23,456,693	)		(15,459,340	)
Total stockholders’ equity		74,892,166			62,489,567
Total liabilities and stockholders’ equity	$	237,383,484		$	178,120,542

The accompanying notes are an integral part of these consolidated financial statements.

4

RESOURCE APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Rental income	$	4,091,185		$	1,827,196		$	7,746,967		$	2,690,315
Total revenues		4,091,185			1,827,196			7,746,967			2,690,315
Expenses:
Rental operating - expenses		809,644			346,784			1,491,055			483,280
Rental operating - payroll		412,606			199,196			783,480			278,532
Rental operating - real estate taxes		579,216			182,989			1,076,447			307,192
Subtotal- rental operating		1,801,466			728,969			3,350,982			1,069,004
Property management fees		2,624			2,344			5,235			4,361
Management fees - related parties		630,599			290,565			1,204,637			426,491
General and administrative		602,250			527,348			1,394,922			955,120
Loss on disposal of assets		131,611			3,879			218,473			6,488
Depreciation and amortization expense		2,216,145			1,152,791			4,453,246			1,714,946
Total expenses		5,384,695			2,705,896			10,627,495			4,176,410
Loss before other income (expense)		(1,293,510	)		(878,700	)		(2,880,528	)		(1,486,095	)
Other income (expense):
Interest income		83,164			44,292			152,980			70,214
Interest expense		(1,391,557	)		(554,042	)		(2,659,762	)		(798,724	)
Total other income (expense)		(1,308,393	)		(509,750	)		(2,506,782	)		(728,510	)
Net loss	$	(2,601,903	)	$	(1,388,450	)	$	(5,387,310	)	$	(2,214,605	)
Other comprehensive (loss) income:
Designated derivatives, fair value adjustments		2,046			(21,309	)		869			(17,270	)
Total other comprehensive (loss) income		2,046			(21,309	)		869			(17,270	)
Comprehensive loss	$	(2,599,857	)	$	(1,409,759	)	$	(5,386,441	)	$	(2,231,875	)

The accompanying notes are an integral part of these consolidated financial statements.

5

RESOURCE APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - (continued)

(unaudited)

	Three Months Ended June 30,							Six Months Ended June 30,
	2019			2018				2019			2018
Class A common stock:
Net loss attributable to Class A common stockholders	$	(138,232	)	$	(154,200	)		$	(306,114	)	$	(272,581	)
Net loss per Class A share, basic and diluted	$	(0.22	)	$	(0.25	)		$	(0.48	)	$	(0.44	)
Weighted average Class A common shares outstanding, basic and diluted		635,764			626,103				635,630			624,518
Class T common stock:
Net loss attributable to Class T common stockholders	$	(269,481	)	$	(291,749	)	0	$	(590,857	)	$	(526,031	)
Net loss per Class T share, basic and diluted	$	(0.24	)	$	(0.27	)		$	(0.53	)	$	(0.48	)
Weighted average Class T common shares outstanding, basic and diluted		1,118,038			1,089,943				1,116,159			1,086,970
Class R common stock:
Net loss attributable to Class R common stockholders	$	(2,088,721	)	$	(921,259	)	0	$	(4,290,343	)	$	(1,386,823	)
Net loss per Class R share, basic and diluted	$	(0.23	)	$	(0.24	)		$	(0.51	)	$	(0.42	)
Weighted average Class R common shares outstanding, basic and diluted		8,968,558			3,848,272				8,455,769			3,280,470
Class I common stock:
Net loss attributable to Class I common stockholders	$	(105,469	)	$	(21,242	)	0	$	(199,996	)	$	(29,170	)
Net loss per Class I share, basic and diluted	$	(0.18	)	$	(0.16	)		$	(0.41	)	$	(0.32	)
Weighted average Class I common shares outstanding, basic and diluted		585,893			133,309				483,610			91,914

The accompanying notes are an integral part of these consolidated financial statements.

6

RESOURCE APARTMENT REIT III, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE THREE AND SIX MONTHS ENDEDJUNE 30, 2019 AND 2018

(unaudited)

	Common Stock																				Convertible Stock
	Shares										Amount
	A Shares			T Shares			R Shares		I Shares		A Shares			T Shares			R Shares		I Shares		Shares		Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
Balance, at April 1, 2019		637,293			1,119,361			8,744,329		456,135		6,373			11,194			87,443		4,561		50,000	$	500		92,373,880			(41,810	)		(19,501,790	)	$	72,940,351
Issuance of common stock		-			-			488,614		157,334		-			-			4,886		1,574		—		—		6,218,508			—			—			6,224,968
Offering costs		-			-			-		-		-			-			-		-		—		—		(598,229	)		—			—			(598,229	)
Cash distributions declared		-			-			-		-		-			-			-		-		—		—		—			—			(1,353,000	)		(1,353,000	)
Common stock issued through distribution reinvestment plan		2,859			8,140			61,275		793		28			81			613		8		—		—		665,626			—			—			666,356
Other comprehensive income		-			-			-		-		-			-			-		-		—		—		—			2,046			—			2,046
Net loss		-			-			-		-		-			-			-		-		—		—		—			—			(2,601,903	)		(2,601,903	)
Share redemptions		(16,914	)		(28,087	)		-		-		(169	)		(281	)		-		-		—		—		(387,973	)		—			—			(388,423	)
Balance, at June 30, 2019		623,238			1,099,414			9,294,218		614,262		6,232			10,994			92,942		6,143		50,000	$	500		98,271,812			(39,764	)		(23,456,693	)	$	74,892,166
Balance, at January 1, 2019		634,493			1,111,394			7,181,534		329,604		6,345			11,114			71,815		3,296		50,000	$	500	$	77,896,470		$	(40,633	)	$	(15,459,340	)	$	62,489,567
Issuance of common stock		-			-			1,998,867		283,601		-			-			19,989		2,836		—		—		21,995,434			—			—			22,018,259
Offering costs		-			-			-		-		-			-			-		-		—		—		(2,473,982	)		—			—			(2,473,982	)
Cash distributions declared		-			-			-		-		-			-			-		-		—		—		—			—			(2,610,043	)		(2,610,043	)
Common stock issued through distribution reinvestment plan		5,659			16,107			113,817		1,057		56			161			1,138		11		—		—		1,241,863			—			—			1,243,229
Other comprehensive income		-			-			-		-		-			-			-		-		—		—		—			869			—			869
Net loss		-			-			-		-		-			-			-		-		—		—					—			(5,387,310	)		(5,387,310	)
Share redemptions		(16,914	)		(28,087	)		-		-		(169	)		(281	)		-		-		—		—		(387,973	)		—			—			(388,423	)
Balance, at June 30, 2019		623,238			1,099,414			9,294,218		614,262		6,232			10,994			92,942		6,143		50,000	$	500	$	98,271,812		$	(39,764	)	$	(23,456,693	)	$	74,892,166

The accompanying notes are an integral part of this consolidated financial statement.

7

RESOURCE APARTMENT REIT III, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY – (continued)

FOR THE THREE AND SIX MONTHS ENDEDJUNE 30, 2019 AND 2018

(unaudited)

	Common Stock																		Convertible Stock
	Shares									Amount
	A Shares		T Shares			R Shares		I Shares		A Shares		T Shares			R Shares		I Shares		Shares		Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
Balance, at April 1, 2018		624,078		1,084,484			3,314,097		61,380	$	6,241	$	10,845		$	33,141	$	614		50,000	$	500	$	43,261,424		$	(7,153	)	$	(6,632,165	)	$	36,673,447
Issuance of common stock		—		—			1,084,995		71,705		—		—			10,850		717		—		—		10,963,265			—			—			10,974,832
Offering costs		—		—			—		—		—		—			—		—		—		—		(1,932,959	)		—			—			(1,932,959	)
Cash distributions declared		—		—			—		—		—		—			—		—		—		—		—			—			(757,120	)		(757,120	)
Common stock issued through distribution reinvestment plan		4,160		10,762			32,159		147		41		108			322		1		—		—		432,537			—			—			433,009
Other comprehensive income		—		—			—		—		—		—			—		—		—		—		—			(21,309	)		—			(21,309	)
Net loss		—		—			—		—		—		—			—		—		—		—		—			—			(1,388,450	)		(1,388,450	)
Share redemptions		—		—			—		—		—		—			—		—		—		—		—			—			—			-
Balance, at June 30, 2018		628,238		1,095,246			4,431,251		133,232	$	6,282	$	10,953		$	44,313	$	1,332		50,000	$	500	$	52,724,267		$	(28,462	)	$	(8,777,735	)	$	43,981,450
Balance, at January 1, 2018		621,754		1,081,226			2,058,008		36,118	$	6,218	$	10,812		$	20,580	$	361		50,000	$	500	$	32,323,424		$	(11,192	)	$	(5,218,198	)	$	27,132,505
Issuance of common stock		—		—			2,330,100		96,897		—		—			23,301		969		—		—		23,032,256			—			—			23,056,526
Offering costs		—		—			—		—		—		—			—		—		—		—		(3,217,795	)		—			—			(3,217,795	)
Cash distributions declared		—		—			—		—		—		—			—		—		—		—		—			—			(1,344,932	)		(1,344,932	)
Common stock issued through distribution reinvestment plan		6,484		16,174			43,143		217		64		162			432		2		—		—		604,867			—			—			605,527
Other comprehensive income		—		—			—		—		—		—			—		—		—		—		—			(17,270	)		—			(17,270	)
Net loss		—		—			—		—		—		—			—		—		—		—		—			—			(2,214,605	)		(2,214,605	)
Share redemptions		—		(2,154	)		—		—		—		(21	)		—		—		—		—		(18,485	)		—			—			(18,506	)
Balance, at June 30, 2018		628,238		1,095,246			4,431,251		133,232	$	6,282	$	10,953		$	44,313	$	1,332		50,000	$	500	$	52,724,267		$	(28,462	)	$	(8,777,735	)	$	43,981,450

The accompanying notes are an integral part of this consolidated financial statement.

8

RESOURCE APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(5,387,310	)	$	(2,214,605	)
Adjustment to reconcile net loss to net cash (used in) provided by operating activities:
Loss on disposal of assets		218,473			6,488
Depreciation and amortization		4,453,246			1,714,946
Amortization of deferred financing costs		117,180			41,222
Realized loss on change in fair value of interest rate cap		2,963			—
Changes in operating assets and liabilities:
Tenant receivables, net		(9,083	)		1,239
Due from related parties		8,392			(3,894	)
Prepaid expenses and other assets		(218,430	)		(15,462	)
Due to related parties		(699,944	)		354,187
Accounts payable and accrued expenses		1,165,318			436,328
Tenant prepayments		(75,187	)		23,064
Security deposits		4,818			14,182
Net cash (used in) provided by operating activities		(419,563	)		357,695
Cash flows from investing activities:
Property acquisition		(17,335,215	)		(12,859,966	)
Capital expenditures		(2,812,055	)		(529,118	)
Net cash used in investing activities		(20,147,270	)		(13,389,084	)
Cash flows from financing activities:
Net proceeds from issuance of common stock		21,767,870			21,454,364
Redemptions of common stock		(388,423	)		(18,506	)
Payments on borrowings		(17,539	)		(17,002	)
Payment of deferred financing costs		(715,016	)		(410,275	)
Distributions paid on common stock		(1,088,832	)		(496,157	)
Net cash provided by financing activities		19,558,060			20,512,424
Net increase (decrease) in cash and restricted cash		(1,008,774	)		7,481,035
Cash and restricted cash at beginning of period		33,711,292			23,944,874
Cash and restricted cash at end of period	$	32,702,518		$	31,425,909
Reconciliation to consolidated balance sheets:
Cash	$	30,338,228		$	30,663,307
Restricted Cash		2,364,290			762,602
Cash and restricted cash at end of period	$	32,702,518		$	31,425,909

The accompanying notes are an integral part of these consolidated financial statements.

9

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2019

(unaudited)

NOTE 1 - NATURE OF BUSINESS AND OPERATIONS

Resource Apartment REIT III, Inc. (the "Company") was organized in Maryland on July 15, 2015. The Company is offering up to $1.1 billion of shares of its common stock, consisting of up to $1.0 billion of shares in its primary offering and up to $100.0 million of shares pursuant to its distribution reinvestment plan (the "DRIP"). The Company expects to offer shares in its primary initial public offering until the registration statement relating to its proposed follow-on offering that was filed on April 24, 2019 is declared effective by the Securities and Exchange Commission.

Through July 2, 2017, the Company offered shares of Class A and Class T common stock in the primary and DRIP offering. As of July 3, 2017, the Company ceased offering shares of Class A and Class T common stock in its primary offering and commenced offering shares of Class R and Class I common stock in both the primary and DRIP offering.

On June 27, 2018 and March 21, 2019, the board of directors of the Company determined an estimated net asset value (“NAV”) per share of the common stock of $9.05 and $9.12, respectively, based on the estimated market value of the portfolio of investments of the Company as of March 31, 2018 and December 31, 2018, respectively.  Based on the estimated NAV per share, the board of directors established updated offering prices for shares of Class R and Class I common stock to be sold in the primary portion of the initial public offering by adding certain offering costs to the estimated NAV per share.  Pursuant to the terms of the DRIP, following the establishment of an estimated NAV per share, shares of common stock are sold at the most recent estimated NAV per share.

The prices per share for each class of shares of the Company's common stock through June 30, 2019 were as follows:

	Class A		Class T		Class R		Class I
Primary Offering Price
Inception through July 2, 2017	$	10.00	$	9.47	n/a		n/a
July 3, 2017 through July 1, 2018	n/a		n/a		$	9.52	$	9.13
July 2, 2018 through March 24, 2019	n/a		n/a		$	9.68	$	9.28
March 25, 2019 through June 30, 2019	n/a		n/a		$	9.75	$	9.35
Offering Price under the DRIP
Inception through July 2, 2017	$	9.60	$	9.09	n/a		n/a
July 3, 2017 through July 1, 2018	$	9.60	$	9.09	$	9.14	$	8.90
July 2, 2018 through March 24, 2019 (1)	$	9.05	$	9.05	$	9.05	$	9.05
March 25, 2019 through June 30, 2019 (1)	$	9.12	$	9.12	$	9.12	$	9.12

(1) Shares of common stock pursuant to the DRIP are sold at the Company’s NAV per share.

As of June 30, 2019, the Company has raised aggregate gross primary offering proceeds of approximately $108.3 million from the sale of 601,207 Class A shares, 1,049,996 Class T shares, 9,051,083 Class R shares and 612,560 Class I shares of common stock.

Resource REIT Advisor, LLC (the "Advisor"), an indirect wholly-owned subsidiary of Resource America, Inc. ("RAI"), contributed $200,000 to the Company in exchange for 20,000 shares of Class A common stock on August 10, 2015. On June 29, 2016, RAI purchased 222,222 shares of Class A common stock for $2.0 million in the offering. On August 5, 2016, the Advisor exchanged 5,000 shares of Class A common stock for 50,000 shares of convertible stock. Under limited circumstances, these shares may be converted into shares of the Company's Class A common stock satisfying the Company's obligation to pay the Advisor an incentive fee and diluting its other stockholders’ interest in the Company.

RAI is a wholly-owned subsidiary of C-III Capital Partners, LLC ("C-III"), a leading commercial real estate investment management and services company engaged in a broad range of activities. C-III controls the Advisor, Resource Securities LLC ("Resource Securities"), the Company's dealer manager, and Resource Apartment Manager III, LLC (the "Manager"), the Company's property manager. C-III also controls all of the shares of the Company's common stock held by RAI and the Advisor.

10

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

The Company’s objective is to take advantage of the multifamily investing and lending platforms of Resource Real Estate, LLC (the "Sponsor") to invest in apartment communities in order to provide the investor with growing cash flow and increasing asset values. The Company intends to acquire underperforming apartments which it will renovate and stabilize in order to increase rents. To a lesser extent, the Company may also seek to originate and acquire commercial real estate debt secured by apartments having the same characteristics.

The Company elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 2017. As such, to maintain its REIT qualification for U.S. federal income tax purposes, the Company is generally required to distribute at least 90% of its net income (excluding net capital gains) to its stockholders as well as comply with certain other requirements. Accordingly, the Company generally will not be subject to U.S. federal income taxes to the extent that it annually distributes all of its REIT taxable income to its stockholders. The Company also operates its business in a manner that will permit it to maintain its exemption from registration under the Investment Company Act of 1940, as amended.

The consolidated financial statements and the information and tables contained in the notes thereto are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"), pertaining to interim financial statements in Form 10-Q. However, in the opinion of management, these interim financial statements include all the necessary adjustments to fairly present the results of the interim periods presented. The consolidated balance sheet as of December 31, 2018 was derived from the audited consolidated financial statements as of and for the year ended, December 31, 2018. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The results of operations for the six months ended June 30, 2019 may not necessarily be indicative of the results of operations for the full year ending December 31, 2019.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with GAAP.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as follows:

Subsidiary	Number of Units		Property Location
Resource Apartment REIT III Holdings, LLC	N/A		N/A
Resource Apartment REIT III OP, LP	N/A		N/A
RRE Payne Place Holdings, LLC		11	Alexandria, VA
RRE Bay Club Holdings, LLC		220	Jacksonville, FL
RRE Tramore Village Holdings, LLC		324	Austell, GA
RRE Matthews Reserve Holdings, LLC		212	Matthews, NC
RRE Kensington Holdings, LLC		204	Riverview, FL
RRE Wimbledon Oaks Holdings, LLC		248	Arlington, TX
RRE Summit Holdings, LLC		141	Alexandria, VA
		1,360

N/A - Not Applicable

All intercompany accounts and transactions have been eliminated in consolidation.

11

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Segment Reporting

The Company does not evaluate performance on a relationship-specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single operating segment for reporting purposes in accordance with GAAP.

Concentration of Risk

As of June 30, 2019, the Company's real estate investments in Florida, Virginia, Georgia, North Carolina and Texas represented approximately 28%, 20%, 22%, 17%, and 13%, respectively, of the carrying value of its rental property assets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, adverse weather events, changing demographics and other factors, or any decrease in demand for multifamily rentals resulting from the local business climate, could adversely affect the Company's operating results and its ability to make distributions to stockholders.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Adoption of New Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, "Leases" and amended by ASU No. 2018-09, “Codification Improvements" in July 2018, which is intended to improve financial reporting about leasing transactions and requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. In September 2017, FASB issued ASU No. 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842)", which provides additional implementation guidance on the previously issued ASU No. 2016-02.  On January 1, 2019, the Company adopted ASU No. 2016-02 and the adoption did not have a material effect on its consolidated financial statements and disclosures. The Company’s operating leases, in which it is the lessor, continue to be accounted for on its balance sheet with the underlying leased asset recognized as real estate.  The Company has chosen to apply the practical expedient to nonlease component revenue streams and account for them as a combined component with leasing revenue.  For leases in which the Company is the lessee, consisting of office equipment leases, the Company recognized a right-of-use (“ROU”) asset and a lease liability equal to the present value of the minimum lease payments in the amount of $9,304 at January 1, 2019.  The Company elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward the historical lease classification. Also allowable under the new standard, is the option to present the operating lease ROU asset and operating lease liabilities as of January 1, 2019 and not restate prior periods, which the Company has elected. No cumulative impact adjustment was necessary to opening retained earnings as of January 1, 2019. For certain equipment leases, such as copiers, the Company applied a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

In July 2018, FASB issued ASU No. 2018-11, “Leases: Targeted Improvements” an additional amendment to ASU No. 2016-02.  On January 1, 2019, the Company adopted ASU No. 2018-11 and the adoption did not have a material effect on its consolidated financial statements and disclosures.  The Company applied the practical expedient allowed in this new guidance to combine lease and associated nonlease components by class of underlying asset.  In addition, the Company utilized the optional method for adopting the new leasing guidance and did not restate comparative periods. 

In August 2017, FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. On January 1, 2019, the Company adopted ASU No. 2017-12 and the adoption did not have a material effect on its consolidated financial statements and disclosures.

12

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

In October 2018, FASB issued ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes”. ASU No. 2018-16 permits the use of the Overnight Index Swap (“OIS”) Rate based on the Secured Overnight Financing Rate as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (“LIBOR”) and the OIS Rate based on the Federal Funds Effective Rate. On January 1, 2019, the Company adopted ASU No. 2018-16 and the adoption did not have a material effect on its consolidated financial statements and disclosures.

In June 2018, FASB issued ASU No. 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting” to simplify the accounting for share-based payment transactions for acquiring goods and services from nonemployees by including these payments in the scope of the guidance for share-based payments to employees. On January 1, 2019, the Company adopted ASU No. 2018-07 and the adoption did not have a material effect on its consolidated financial statements and disclosures.

In July 2018, FASB issued ASU No. 2018-09, "Codification Improvements". This standard does not prescribe any new accounting guidance, but instead makes minor improvements and clarifications of several different FASB Accounting Standards Codification areas based on comments and suggestions made by various stakeholders. On January 1, 2019, the Company adopted ASU No. 2018-09 and the adoption did not have a material effect on its consolidated financial statements and disclosures.

Accounting Standards Issued But Not Yet Effective

In June 2016, FASB issued ASU No. 2016-03 "Financial Instruments - Credit Losses", which requires measurement and recognition of expected credit losses for financial assets held. ASU No. 2016-03 will be effective for the Company beginning January 1, 2020. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU 2016-03 to have a material effect on its consolidated financial statements and disclosures due to the fact that the Company did not have instruments subject to this guidance at June 30, 2019.  

In January 2017, FASB issued ASU No. 2017-04, "Intangibles- Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment", which alters the current goodwill impairment testing procedures. ASU No. 2017-04 will be effective for the Company beginning January 1, 2020. Early application is permitted. The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2017-04 to have a significant impact on its consolidated financial statements due to the fact that the Company did not have any goodwill subject to this guidance at June 30, 2019.

In August 2018, FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement”. This update removes, modifies and adds certain disclosure requirements in the FASB Accounting Standards Codification ("ASC") 820, “Fair Value Measurement”. ASU No. 2018-13 will be effective for the Company beginning January 1, 2020 and early adoption is permitted.  The Company is continuing to evaluate this guidance; however, it does not expect the adoption of ASU No. 2018-13 to have a significant impact on its consolidated financial statements.

Real Estate Investments

The Company records acquired rental properties at cost on the acquisition date. The Company considers the period of future benefit of an asset to determine its appropriate useful life and depreciates the asset using the straight line method. The Company anticipates the estimated useful lives of its assets by class as follows:

Buildings	27.5 years
Building improvements	5.0 to 27.5 years
Furniture, fixtures, and equipment	3.0 to 5.0 years
Tenant improvements	Shorter of lease term or expected useful life
Lease intangibles	Remaining term of related lease

13

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Improvements and replacements in excess of $1,000 are capitalized when they have a useful life greater than or equal to one year. The Manager earns a construction management fee of 5% of actual aggregate costs to construct improvements, or to repair, rehab or reconstruct a property. These costs are capitalized along with the related asset. Costs of repairs and maintenance are expensed as incurred.

Impairment of Long Lived Assets

When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. The review also considers factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors.

If impairment exists, due to the inability to recover the carrying value of a property, an impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income.There were no impairment losses recorded on long lived assets during the three and six months ended June 30, 2019 and 2018.

Loans Held for Investment

The Company records acquired real estate loans at cost and reviews them for potential impairment at each balance sheet date. A loan receivable is considered impaired when it becomes probable, based on current information, that the Company will be unable to collect all amounts due according to the loan’s contractual terms. The amount of impairment, if any, is measured by comparing the recorded amount of the loan to the present value of the expected cash flows or the fair value of the collateral. If a loan is deemed to be impaired, the Company will record a reserve for loan losses through a charge to income for any shortfall. Failure to recognize impairment would result in the overstatement of the carrying values of the Company’s real estate loans receivable and an overstatement of the Company’s net income.

The Company may acquire real estate loans at a discount due to credit quality. Revenues from these loans are recorded under the effective interest method. Under this method an effective interest rate ("EIR") is applied to the cost basis of the real estate loan receivable. The EIR that is calculated when the real estate loan is acquired remains constant and is the basis for subsequent impairment testing and income recognition. If the amount and timing of future cash collections are not reasonably estimable, the Company accounts for the real estate loan receivable on the cost recovery method. Under the cost recovery method of accounting, no income is recognized until the basis of the real estate loan receivable has been fully recovered.

Interest income from loans receivable will be recognized based on the contractual terms of the debt instrument. Fees related to any buydown of the interest rate will be deferred as prepaid interest income and amortized over the term of the loan as an adjustment to interest income. Closing costs related to the purchase of a loan receivable will be amortized over the term of the loan and accreted as an adjustment against interest income. There were no loans held for investment on the Company's consolidated balance sheets as of both June 30, 2019 and December 31, 2018.

Allocation of Purchase Price of Acquired Assets

On January 1, 2018, the Company adopted ASU No. 2017-01. Acquisitions that do not meet the definition of a business under this guidance are accounted for as asset acquisitions. In most cases, the Company believes acquisitions of real estate will no longer be considered a business combination as in most cases substantially all of the fair value is concentrated in a single identifiable asset or group of tangible assets that are physically attached to each other (land and building). However, if the Company determines that substantially all of the fair value of the gross assets acquired is not concentrated in either a single identifiable asset or in a group of similar identifiable assets, the Company will then perform an assessment to determine whether the set is a business by using the framework outlined in the ASU. If the Company determines that the acquired asset is not a business, the Company will allocate the cost of the acquisition including transaction costs to the assets acquired or liabilities assumed based on their related fair value.

14

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Upon the acquisition of real properties, the Company allocates the purchase price to tangible assets, consisting of land, building, fixtures and improvements, and identified intangible lease assets and liabilities, consisting of the value of above-market and below-market leases, as applicable, other value of in-place leases and value of tenant relationships, based in each case on their fair values.

The Company records above-market and below-market in-place lease values for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The Company amortizes any capitalized above-market or below-market lease values as an increase or reduction to rental income over the remaining non-cancelable terms of the respective leases, which the Company expects will range from one month to one year.

The Company measures the aggregate value of other intangible assets acquired based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management’s estimates of value are determined by independent appraisers (e.g., discounted cash flow analysis). Factors to be considered in the analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions and costs to execute similar leases.

The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods. Management also estimates costs to execute similar leases including leasing commissions and legal and other related expenses to the extent that such costs have not already been incurred in connection with a new lease origination as part of the transaction.

The total amount of other intangible assets acquired is further allocated to in-place lease values and customer relationship intangible values based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with that respective tenant. Characteristics to be considered by management in allocating these values include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors.

The Company amortizes the value of in-place leases to expense over the average remaining term of the underlying leases. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event will the amortization periods for the intangible assets exceed the remaining depreciable life of the building.

The determination of the fair value of the assets and liabilities acquired requires the use of significant assumptions with regard to current market rental rates, discount rates and other variables. The use of inappropriate estimates would result in an incorrect assessment of the fair value of these assets and liabilities, which could impact the amount of the Company’s reported net income.

Revenue Recognition

The Company recognizes minimum rent, including rental abatements and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related lease. The future minimum rental payments to be received from noncancelable operating leases for residential rental properties are approximately $7.7 million and $140,285 for the 12 month periods ending June 30, 2020 and 2021, respectively, and none thereafter.

Revenue is primarily derived from the rental of residential housing units for which the Company receives minimum rents pursuant to underlying tenant lease agreements.  The Company also receives utility reimbursements, other ancillary tenant fees for administration of leases, late payments and amenities, which are charged to residents and recognized monthly as earned.  The Company elected the practical expedient to not separate lease and non-lease components and has presented property revenues combined based upon the lease being determined the predominant component.  The Company also has revenues sharing arrangements of cable income from contracts with cable providers at the Company's properties.

15

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Tenant Receivables

The Company evaluates its portfolio of operating leases for collectability at both the onset of the underlying leases and on an ongoing basis. Tenant receivables include amounts for which collectability was assessed as probable in accordance with the guidance in ASC 842-30. For tenant receivables, which include base rents, straight-line rentals, expense reimbursements and other revenue or income, the Company also estimates a general allowance for uncollectible accounts under ASC 450-20.  The allowance is based on the Company’s historical collection experience, tenant creditworthiness, and current economic trends. The Company writes off tenant receivables when they are determined uncollectible. At June 30, 2019 and December 31, 2018, there were allowances for uncollectible receivables of $711 and $5,593, respectively.

Income Taxes

The Company elected to be taxed as a REIT commencing with its taxable year ended December 31, 2017. As a REIT, the Company will generally not be subject to corporate U.S. federal or state income tax to the extent that it makes qualifying distributions to its stockholders, and provided it satisfies, on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income, distribution and stock ownership tests. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it will be subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year in which it lost its REIT qualification. Accordingly, the Company’s failure to qualify as a REIT could have a material adverse impact on its results of operations and amounts available for distribution to its stockholders.

The dividends paid deduction of a REIT for qualifying dividends to its stockholders is computed using the Company’s taxable income as opposed to net income reported on the financial statements. Taxable income, generally, differs from net income reported on the financial statements because the determination of taxable income is based on tax provisions and not financial accounting principles.

The Company may elect to treat certain of its subsidiaries as a taxable REIT subsidiary ("TRS"). In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business. A TRS is subject to U.S. federal, state and local corporate income taxes. At June 30, 2019 and December 31, 2018, the Company did not treat any of its subsidiaries as a TRS.

While a TRS may generate net income, a TRS can declare dividends to the Company which will be included in the Company’s taxable income and necessitate a distribution to its stockholders. Conversely, if the Company retains earnings at a TRS level, no distribution is required and the Company can increase book equity of the consolidated entity.

Earnings Per Share

Basic earnings per share are computed by dividing net income (loss) attributable to common stockholders for each period by the weighted-average common shares outstanding during the period for each share class. Diluted net income (loss) per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted to common stock. None of the 50,000 shares of convertible stock (discussed in Note 10) are included in the diluted earnings per share calculations because the necessary conditions for conversion have not been satisfied as of June 30, 2019 (were such date to represent the end of the contingency period). For the purposes of calculating earnings per share, all common shares and per share information in the financial statements have been retroactively adjusted for the effect of any stock dividends and stock splits. For the three and six months ended June 30, 2019 and 2018, common shares potentially issuable to settle distributions payable are excluded from the calculation of diluted earnings per share calculations, as their inclusion would be anti-dilutive.

In accordance with ASC 260-10-45, "Earnings Per Share", the Company uses the two-class method to calculate earnings per share. Basic earnings per share is calculated based on dividends declared and the rights of common shares and participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends declared during the period. The undistributed earnings are allocated to all outstanding common shares based on their relative percentage of each class of shares to the total number of outstanding shares. The Company did not have any participating securities outstanding other than Class A common stock, Class T common stock, Class R common stock and Class I common stock during the periods presented (see Note 10).

16

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Organization and Offering Costs

Organization and offering costs (other than selling commissions, dealer manager fees, and distribution and shareholder servicing fees) of the Company are initially being paid by the Advisor on behalf of the Company.

Pursuant to the advisory agreement between the Company and the Advisor, the Company is obligated to reimburse the Advisor for organization and other offering costs paid by the Advisor on behalf of the Company, up to an amount equal to 4.0% of gross offering proceeds as of the termination of the initial public offering if the Company raises less than $500.0 million in the primary portion of the initial public offering and 2.5% of gross offering proceeds as of the termination of the initial public offering if the Company raises $500.0 million or more in the primary portion of the initial public offering.

On April 13, 2018, the board of directors approved an amendment to the advisory agreement that provides that the Company is not responsible for the reimbursement of any unreimbursed organization and offering expenses or operational expenses incurred by the Advisor on the Company’s behalf through March 31, 2018 until after the termination of the primary portion of the Company’s ongoing initial public offering. Additionally, the amendment provides that such unreimbursed organization and offering expenses or operational expenses incurred or paid by the Advisor on the Company’s behalf through March 31, 2018 will be reimbursed ratably starting after the termination of the primary portion of the Company’s ongoing initial public offering through April 30, 2021 for organization and offering expenses and through April 30, 2020 for operating expenses.

As of June 30, 2019, the Company has incurred approximately $9.1 million for public offering costs consisting of accounting, advertising, allocated payroll, due diligence, marketing, legal and similar costs. As of June 30, 2019, the Advisor has advanced approximately $8.1 million of these costs on behalf of the Company. The Company has paid approximately $249,000 of these costs directly and reimbursed approximately $747,000 to the Advisor.

As of June 30, 2019, the Company has charged approximately $4.3 million of offering costs to equity, which represents the portion of deferred offering costs allocated to each share of common stock sold in the public offering. Deferred offering costs of approximately $4.8 million represent the portion of the total offering costs incurred that have not yet been charged to equity. Upon completion of the public offering, any deferred offering costs in excess of the limit on organization and offering costs discussed above, will not be paid to our Advisor.

Organization costs, which include all expenses incurred by the Company in connection with its formation, including but not limited to legal fees and other costs to incorporate, are expensed as incurred. There can be no assurance that the Company's plans to raise capital will be successful. Prior to the Company breaking escrow, the Advisor incurred $104,266 of formation and other operating expenses on the Company's behalf, which will not be reimbursed to the Advisor.

Outstanding Class T shares issued in the Company's primary offering are subject to an annual distribution and shareholder servicing fee in the amount of 1% of the estimated NAV of the share (1% of purchase price prior to June 29, 2018) for five years from the date on which such share is issued. The Company will cease paying the distribution and shareholder servicing fee on each Class T share prior to the fifth anniversary of its issuance on the earliest of the following, should any of these events occur: (i) the date at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from the Company's primary offering (i.e., excluding proceeds from sales pursuant to the DRIP); (ii) the date on which the Company lists its common stock on a national securities exchange; and (iii) the date of a merger or other extraordinary transaction in which the Company is a party and in which the common stock is exchanged for cash or other securities. The Company cannot predict if or when any of these events will occur.

Outstanding Class R shares issued in the Company's primary offering are also subject to an annual distribution and shareholder servicing fee in the amount of 1% of the estimated NAV of the share (1% of purchase price prior to June 29, 2018).  The Company will cease paying the distribution and shareholder servicing fee with respect to Class R shares held in any particular account, and those Class R shares will convert into a number of Class I shares determined by multiplying each Class R share to be converted by the applicable "Conversion Rate," on the earlier of (i) the date after the termination of the primary offering at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from its primary offering; (ii) a listing of the Class I shares on a national securities exchange; (iii) a merger or consolidation of the company with or into another entity, or the sale or other disposition of all or substantially all of its assets; and (iv) the end of the month in which the total underwriting compensation (which consists of selling commissions, dealer manager fees and distribution and shareholder servicing fees) paid with respect to such Class R shares purchased in a primary offering is not less

17

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

than 8.5% (or a lower limit, provided that, in the case of a lower limit, the agreement between the Resource Securities and the broker-dealer in effect at the time Class R shares were first issued to such account sets forth the lower limit and Resource Securities advises the Company's transfer agent of the lower limit in writing) of the gross offering price of those Class R shares purchased in such primary offering (excluding shares purchased through its distribution reinvestment plan).

The Company records distribution and shareholder servicing fees as a reduction to additional paid-in capital and the related liability in an amount equal to the maximum fees payable in relation to the Class T and Class R shares on the date the shares are issued. The liability will be relieved over time, as the fees are paid to the Dealer Manager, or as the fees are adjusted (if the fees are no longer payable pursuant to the conditions described above.) For issued Class T shares, the Company has accrued an estimate of total distribution and shareholder servicing fees of $465,638 for the full five year period at June 30, 2019 based on a total of 5% of the gross proceeds from all Class T shares sold, of which the Company paid $207,141 cumulatively through June 30, 2019. For issued Class R shares, the Company has accrued an estimate of total distribution and shareholder servicing fees of $2.4 million at June 30, 2019 based on a total of 3% of the gross proceeds from all Class R shares sold, of which the Company paid $753,435 cumulatively through June 30, 2019. The total accrual of approximately $1.9 million is included in due to related parties on the Company's consolidated balance sheet at June 30, 2019.

NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION

The following table presents the Company's supplemental cash flow information:

	Six Months Ended June 30,
	2019		2018
Non-cash operating, financing and investing activities:
Offering costs payable to related parties	$	629,376	$	1,428,461
Offering costs payable to third parties		—		(32,311	)
Distribution and shareholder servicing fee payable to    related parties		94,518		475,502
Cash distributions on common stock declared but not    yet paid		1,315,781		697,125
Stock issued from distribution reinvestment plan		1,243,229		605,527
Subscriptions receivable		110,000		619,500
Escrow deposits funded directly by mortgage notes payable		797,855		243,637
Non-cash activity related to acquisitions:
Mortgage notes payable used to acquire real properties		45,192,145		32,381,363
Cash paid during the period for:
Interest	$	2,481,341	$	644,876

NOTE 4 - RESTRICTED CASH

Restricted cash represents escrow deposits with lenders to be used to pay real estate taxes, insurance, and capital improvements. The following table presents a summary of the components of the Company's restricted cash:

	June 30, 2019		December 31, 2018
Real estate taxes	$	1,363,630	$	19,988
Insurance		191,133		150,263
Capital improvements		809,527		713,651
Total	$	2,364,290	$	883,902

In addition, the Company designated unrestricted cash for capital expenditures of approximately $11.6 million and $9.2 million at June 30, 2019 and December 31, 2018, respectively.

18

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

NOTE 5 - ACQUISITION

On February 12, 2019, the Company, through its wholly-owned subsidiary, purchased a multifamily community located in Arlington, Texas ("Wimbledon Oaks"). Wimbledon Oaks, constructed in 1986, contains 248 units plus amenities, including a swimming pool, clubhouse, and a fitness center. Wimbledon Oaks encompasses 189,960 rentable square feet. At June 30, 2019, Wimbledon Oaks was 90% leased.

On June 24, 2019, the Company, through its wholly-owned subsidiary, purchased a multifamily community located in Alexandria, Virginia ("Summit"). Summit, constructed in 1976, contains 141 units and amenities, including a swimming pool, clubhouse, and a fitness center. Summit encompasses 164,140 rentable square feet. At June 30, 2019, Summit was 94%  leased.

The following table presents the allocated contract purchase price, acquisition fee, and acquisition costs of the Company’s acquisitions during the six months ended June 30, 2019:  

	Contract Purchase Price		Acquisition Fee (1)		Acquisition Costs (2)		Total Real Estate, Cost
Wimbledon Oaks
Land	$	3,779,617	$	83,471	$	30,014	$	3,893,102
Building and Improvements		20,970,743		463,127		166,529		21,600,399
Furniture, fixtures and equipment		377,962		8,347		3,001		389,310
Intangible Assets		721,678		15,938		5,731		743,347
	$	25,850,000	$	570,883	$	205,275	$	26,626,158
Summit
Land	$	8,288,088	$	181,740	$	96,178	$	8,566,006
Building and Improvements		26,981,318		591,641		313,101		27,886,060
Furniture, fixtures and equipment		346,356		7,595		4,019		357,970
Intangible Assets		759,238		16,648		8,810		784,696
	$	36,375,000	$	797,624	$	422,108	$	37,594,732

(1) Represents acquisition fee of 2% of the cost of investments, paid to the Advisor.

(2) Represents transaction costs paid both at closing and post-closing, excluding Acquisition Fees.

NOTE 6 - RENTAL PROPERTIES, NET

The following table presents the Company's investment in rental properties:

	June 30, 2019			December 31, 2018
Land	$	31,220,230		$	18,761,123
Building and improvements		169,880,590			118,625,834
Furniture, fixtures, and equipment		3,551,290			2,202,006
Construction in progress		437,898			265,233
		205,090,008			139,854,196
Less: accumulated depreciation		(7,092,917	)		(3,792,610	)
Total rental property, net	$	197,997,091		$	136,061,586

19

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Depreciation expense for the three and six months ended June 30, 2019 was $1.7 million and $3.3 million, respectively. Depreciation expense for the three and six months ended June 30, 2018 was $715,940 and $998,662, respectively.

Loss on disposal of assets:  During the three and six months ended June 30, 2019, the Company recorded losses on the disposal of assets of $131,611and $218,473, respectively, due to the replacement of appliances at its rental properties in conjunction with unit upgrades. During the three and six months ended June 30, 2018, the Company recorded losses on the disposal of assets of $3,879 and $6,488, respectively, due to the replacement of appliances at its rental properties in conjunction with unit upgrades.  

NOTE 7 - IDENTIFIED INTANGIBLE ASSETS, NET

Identified intangible assets, net, consist of in-place rental leases. The net carrying value of the acquired in-place leases at June 30, 2019 and December 31, 2018 was $1.1 million and $707,825, respectively, net of the accumulated amortization of approximately $3.5 million and $2.4 million, respectively. At June 30, 2019, the weighted average remaining life of the rental leases was seven months.

Amortization for the three months ended June 30, 2019 and 2018 was $468,839 and $436,851, respectively. Amortization for the six months ended June 30, 2019 and 2018 was $1.1 million and $716,284, respectively. At June 30, 2019, expected amortization for the in-place rental leases for the next 12 months is $1.1 million and none thereafter.

NOTE 8 - MORTGAGE NOTES PAYABLE, NET

The following table presents a summary of the Company's mortgage notes payable, net, at June 30, 2019 and December 31, 2018:

	June 30, 2019							December 31, 2018
Collateral	Outstanding Borrowings		Deferred Financing Costs, net			Carrying Value		Outstanding borrowings		Deferred Financing Costs, net			Carrying Value
Payne Place		1,542,697	$	(29,283	)	$	1,513,414	$	1,560,236	$	(30,220	)	$	1,530,016
Bay Club		21,520,000		(232,127	)		21,287,873		21,520,000		(255,957	)		21,264,043
Tramore Village		32,625,000		(334,217	)		32,290,783		32,625,000		(363,784	)		32,261,216
Matthews Reserve		23,850,000		(291,348	)		23,558,652		23,850,000		(315,236	)		23,534,764
The Park at Kensington		21,760,000		(282,523	)		21,477,477		21,760,000		(305,399	)		21,454,601
Wimbledon Oaks		18,410,000		(254,804	)		18,155,196		—		—			—
Summit		27,580,000		(444,129	)		27,135,871		—		—			—
Total	$	147,287,697	$	(1,868,432	)	$	145,419,265	$	101,315,236	$	(1,270,596	)	$	100,044,640

The following table presents additional information about the Company's mortgage notes payable, net:

Collateral	Maturity Date	Annual Interest Rate				Average Monthly Debt Service		Average Monthly Escrow
Payne Place	1/1/2047		3.11	%	(1)(5)	$	6,948	$	2,531
Bay Club	8/1/2024		4.27	%	(2)(6)		103,482		52,024
Tramore Village	4/1/2025		4.20	%	(3)(6)		118,929		55,872
Matthews Reserve	9/1/2025		4.47	%	(4)(6)		90,322		20,127
The Park at Kensington	10/1/2025		4.36	%	(4)(6)		80,379		37,346
Wimbledon Oaks	3/1/2026		4.33	%	(4)(6)		67,537		63,822
Summit	8/1/2026		3.84	%	(4)(6)		89,593		42,698

(1)   Fixed rate until January 1, 2020, when the fixed rate of the note changes to variable rate based on six-month LIBOR plus 2.25%, with an all-in interest rate floor of 2.50% and ceiling of 9.50%.

(2) Variable rate based on one-month LIBOR of 2.40% (at June 30, 2019) plus 1.87%, with a maximum interest rate of 5.75%; see Note 13.

(3) Variable rate based on one-month LIBOR of 2.40% (at June 30, 2019) plus 1.80%, with a maximum interest rate of 6.25%; see Note 13.

(4) Fixed rate.

(5) Through December 18, 2018, RAI co-guaranteed this loan with the Company. See Note 9 for more details.

20

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

(6) Monthly interest-only payment currently required.

All mortgage notes are collateralized by a first mortgage lien on the assets of the respective property named in the table above. The amount outstanding on the mortgages may be prepaid in full during the entire term with a prepayment penalty for a period of the term.

On February 12, 2019, the Company, through a wholly owned subsidiary, entered into a seven-year secured mortgage loan with M&T Realty Capital Corporation, an unaffiliated lender, for borrowings of approximately $18.4 million secured by Wimbledon Oaks (the “Wimbledon Oaks Mortgage Loan”). The Wimbledon Oaks Mortgage Loan matures on March 1, 2026 and bears interest at a fixed rate of 4.33%. Monthly payments are interest only for the first 36 months. Beginning on April 1, 2022, the Company will pay both principal and interest on the Wimbledon Oaks Mortgage Loan based on 30 year amortization. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity.

Prepayment in full is permitted on any scheduled payment date, provided a prepayment premium is paid. The prepayment premium will be based on the greater of (i) the yield maintenance prepayment formula and (ii) 1% of the amount of the principal being repaid, for any prepayment made prior to March 1, 2024. The prepayment premium will be 1% of the amount of principal being repaid for any prepayment made from (and including) March 1, 2024 through October 31, 2025. No prepayment premium is required after November 1, 2025. The non-recourse carveouts under the loan documents for the Wimbledon Oaks Mortgage Loan are guaranteed by the Company.

On June 24, 2019, the Company, through a wholly owned subsidiary, entered into a seven-year secured mortgage loan with CBRE Capital Markets, Inc., an unaffiliated lender, for borrowings of approximately $27.6 million secured by Summit (the “Summit Mortgage Loan”). The Summit Mortgage Loan matures on July 1, 2026 and bears interest at a fixed rate of 3.84%. Monthly payments are interest only for the first 36 months. Beginning on August 1, 2022, the Company will pay both principal and interest on the Summit Mortgage Loan based on 30 year amortization. Any remaining principal balance and all accrued and unpaid interest and fees will be due at maturity.

The following table presents the Company's annual principal payments on outstanding borrowings for each of the next five 12-month periods ending June 30, and thereafter:

2020	$	325,789
2021		489,675
2022		1,552,973
2023		2,516,980
2024		2,654,195
Thereafter		139,748,085
	$	147,287,697

Deferred financing costs incurred to obtain financing are amortized over the term of the related debt. During the three months ended June 30, 2019 and 2018, amortization of deferred financing costs of $57,990 and $27,323, respectively, was included in interest expense. During the six months ended June 30, 2019 and 2018, amortization of deferred financing costs of $117,180 and $41,222, respectively, was included in interest expense. Accumulated amortization at June 30, 2019 and December 31, 2018 was $266,350 and $149,170, respectively.

The following table presents the Company's estimated amortization of the existing deferred financing costs for the next five 12-month periods ending June 30, and thereafter:

2020	$	307,996
2021		306,110
2022		303,838
2023		299,116
2024		294,157
Thereafter		357,215
	$	1,868,432

21

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

NOTE 9 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Relationship with the Advisor

The Company is externally managed and advised by the Advisor. Pursuant to the terms of the advisory agreement, the Advisor provides the Company with its management team, including its officers, along with appropriate support personnel. The Advisor will be reimbursed for the Company’s allocable share of costs for Advisor personnel, including allocable personnel salaries and benefits. Each of the Company’s officers is an employee of the Sponsor or one of its affiliates. The Company does not have any employees. The Advisor is not obligated to dedicate any specific portion of its time or its employees' time to the Company’s business. The Advisor and any employees of the Sponsor or its affiliates acting on behalf of the Advisor, are at all times subject to the supervision and oversight of the Company’s board of directors and have only such functions and authority as the Company delegates to it. Effective April 28, 2019, the Company renewed the advisory agreement with the Advisor through April 27, 2020.

During the course of the offering, the Advisor will provide offering-related services to the Company and will advance funds to the Company for both operating costs and organization and offering costs. These amounts will be reimbursed to the Advisor from the proceeds from the offering, subject to the aforementioned limits on organization and offering expense reimbursements, although there can be no assurance that the Company’s plans to raise capital will be successful. At June 30, 2019, the Advisor has advanced organization and offering costs on a cumulative basis on behalf of the Company of approximately $8.9 million.

The advisory agreement has a one -year term and may be renewed for an unlimited number of successive one -year terms upon the approval of the Conflicts Committee of the Company's board of directors. Under the advisory agreement, the Advisor will receive fees and will be reimbursed for its expenses as set forth below:

Acquisition fees. The Advisor earns an acquisition fee of 2.0% of the cost of investments acquired on behalf of the Company, plus any capital expenditure reserves allocated, or the amount funded by the Company to acquire or originate loans, including acquisition expenses and any debt attributable to such investments.

Asset management fees. The Advisor earns a monthly asset management fee equal to 0.083% (one-twelfth of 1.0%) of (i) the appraised asset values for all assets owned on the date of the most recently determined NAV of the Company plus, (ii) until the date of the next determination of NAV of the Company, the cost of each asset at the end of each month, without deduction for depreciation, bad debts or other non-cash reserves, for all assets acquired after the most recently determined NAV of the Company, if any. The asset management fee is based only on the portion of the costs or value attributable to the Company’s investment in an asset if the Company does not own all of an asset and does not manage or control the asset.

Disposition fees. The Advisor will earn a disposition fee in connection with the sale of a property equal to the lesser of one-half of the aggregate brokerage commission paid, or if none is paid, 2.0% of the contract sales price.

Debt financing fees. The Advisor earns a debt financing fee equal to 0.5% of the amount available under any debt financing obtained for which it provided substantial services.

Expense reimbursements. The Company also will pay directly or reimburse the Advisor for all of the expenses paid or incurred by the Advisor or its affiliates on behalf of the Company or in connection with the services provided to the Company in relation to its public offering, including its distribution reinvestment plan offering. This includes all organization and offering costs of up to 4.0% of gross offering proceeds if the Company raises less than $500.0 million in the primary offering and 2.5% of gross offering proceeds if the Company raises more than $500.0 million in the primary offering. Reimbursements also include expenses the Advisor incurs in connection with providing services to the Company, including the Company’s allocable share of costs for Advisor personnel and overhead, out-of-pocket expenses incurred in connection with the selection and acquisition of properties or other real estate related debt investments, whether or not the Company ultimately acquires the investment. However, the Company will not reimburse the Advisor or its affiliates for employee costs in connection with services for which the Advisor earns acquisition or disposition fees. Prior to the Company breaking escrow, the Advisor incurred $104,266 of formation and other operating expenses the Company's behalf, which will not be reimbursed to the Advisor.

On April 13, 2018, the board of directors approved an amendment to the advisory agreement that provides that the Company is not responsible for the reimbursement of any unreimbursed organization and offering expenses or operational

22

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

expenses incurred by the Advisor on the Company’s behalf through March 31, 2018 until after the termination of the primary portion of the Company’s ongoing initial public offering. Additionally, the amendment provides that such unreimbursed organization and offering expenses or operational expenses incurred or paid by the Advisor on the Company’s behalf through March 31, 2018 will be reimbursed ratably starting after the termination of the primary portion of the Company’s ongoing initial public offering through April 30, 2021 for organization and offering expenses and through April 30, 2020 for operating expenses.

Relationship with Resource Apartment Manager III, LLC

The Manager manages real estate properties and real estate-related debt investments and coordinates the leasing of, and manages construction activities related to, some of the Company’s real estate properties pursuant to the terms of the management agreement with the Manager.

Property management fees. The Manager earns a property management fee equal to 4.5% of actual gross cash receipts from the operations of real property investments that it manages and an oversight fee on any real property investments that are managed by third parties. Property management fees are deducted directly from the property's operating account by the property manager. Any property management fees paid to unaffiliated third party property managers in excess of 4.5% of actual gross receipts will be reimbursed to the Company by the Advisor. At June 30, 2019 and December 31, 2018, the Advisor owed the Company $585 and $291, respectively, for property management fees in excess of the 4.5% cap paid to the unaffiliated third party property manager.

Construction management fees. The Manager earns a construction management fee equal to 5.0% of actual aggregate costs to construct improvements to a property.

Debt servicing fees. The Manager will earn a debt servicing fee equal to 2.75% of gross receipts from real estate-related debt investments.

Expense reimbursement. During the ordinary course of business, the Manager or other affiliates of RAI may pay certain shared operating expenses on behalf of the Company. The Company is obligated to reimburse the Manager or other affiliates for such shared operating expenses.

Relationship with Resource Securities

Resource Securities, an affiliate of the Advisor, serves as the Company’s dealer manager and is responsible for marketing the Company’s shares during the public offering.

Dealer manager fee and selling commissions. Pursuant to the terms of the amended and restated dealer manager agreement with Resource Securities, the Company generally pays Resource Securities a selling commission of up to 3.0% of gross offering proceeds from the sale of Class R shares and a dealer manager fee of up to 3.5% of gross offering proceeds from the sale of Class R shares (but the aggregate of such fees shall not exceed 5.5% of gross offering proceeds). The Company generally pays Resource Securities a dealer manager fee of up to 1.5% of gross offering proceeds from the sale of the Class I shares. Resource Securities allows all selling commissions earned and a portion of the dealer manager fee as a marketing fee to participating broker-dealers. No selling commissions or dealer manager fees are earned by Resource Securities in connection with sales under the distribution reinvestment plan. Additionally, the Company may reimburse Resource Securities for bona fide due diligence expenses.

23

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Distribution and shareholder servicing fee. Resource Securities is paid an annual fee of 1.0% of the NAV per share (1% of purchase price prior to June 29, 2018) of Class T common stock sold in the primary offering for five years from the date on which each share is issued up to a total of 5.0%. Resource Securities is also paid an annual fee of 1.0% of the NAV per share (1% of purchase price prior to June 29, 2018) of Class R common stock sold in the primary offering.  The Company will cease paying the distribution and shareholder servicing fee with respect to Class R shares held in any particular account, and those Class R shares will convert into a number of Class I shares determined by multiplying each Class R share to be converted by the applicable "Conversion Rate," on the earlier of (i) the date after the termination of the primary offering at which, in the aggregate, underwriting compensation from all sources equals 10.0% of the gross proceeds from the primary offering; (ii) a listing of the Class I shares on a national securities exchange; (iii) a merger or consolidation of the Company with or into another entity, or the sale or other disposition of all or substantially all of our assets; and (iv) the end of the month in which the total underwriting compensation (which consists of selling commissions, dealer manager fees and distribution and shareholder servicing fees) paid with respect to such Class R shares purchased in a primary offering is not less than 8.5% (or a lower limit, provided that, in the case of a lower limit, the agreement between Resource Securities and the broker-dealer in effect at the time Class R shares were first issued to such account sets forth the lower limit and Resource Securities advises the Company’s transfer agent of the lower limit in writing) of the gross offering price of those Class R shares purchased in such primary offering (excluding shares purchased through the distribution reinvestment plan).

Relationship with RAI and C-III

Property loss pool. The Company's properties participated in a property loss self-insurance pool with other properties directly and indirectly managed by RAI and C-III, which was backed by a catastrophic insurance policy, until February 28, 2019.   Substantially all of the receivables from related parties represent insurance deposits held in escrow by RAI and C-III related to the self-insurance pool which will be returned to the Company. The pool covered losses up to $2.5 million, in aggregate, after a $25,000 deductible per incident. Claims beyond the insurance pool limits were covered by the catastrophic insurance policy, which covered claims up to $250.0 million, after either a $25,000 or a $100,000 deductible per incident, depending on location and/or type of loss.

Beginning of March 1, 2019, the Company now participates (with other properties directly and indirectly managed by RAI and C-III) only in the catastrophic insurance policy, which covers claims up to $250.0 million, after either a $25,000 or a $100,000 deductible per incident, depending on location and/or type of loss. Therefore, unforeseen or catastrophic losses in excess of the Company's insured limits could have a material adverse effect on the Company's financial condition and operating results.

General liability loss pool.  The Company participates (with other properties directly and indirectly managed by RAI and C-III) in a general liability policy. The insured limit for the general liability policy is $76.0 million in total claims, after a $25,000 deductible per incident.

Internal audit fees. RAI performs internal audit services for the Company.

Other transactions. Through December 18, 2018, RAI co-guaranteed the mortgage on Payne Place with the Company until such time as the Company achieved the following: (a) owned a minimum of five apartment complexes; (b) had a minimum net worth of $50.0 million; (c) had liquidity of no less than $5.0 million; and (d) had an aggregate portfolio leverage of no more than 65% (see Note 8 for further details). As of December 18, 2018, RAI has been released from the guaranty.

The Company paid The Planning & Zoning Resource Company, a subsidiary of C-III, $2,716 for zoning reports in connection with its acquisition of Wimbledon Oaks and Summit during the six months ended June 30, 2019 .

The Company participates in a liability insurance program for directors and officers coverage with other C-III managed entities and subsidiaries for coverage up to $100.0 million. 

24

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

The following table presents the Company's amounts receivable from and amounts payable to such related parties:

	June 30, 2019		December 31, 2018
Due from related parties:
Advisor	$	585	$	291
RAI and affiliate - insurance funds held in escrow		4,386		12,799
Resource Securities		409		682
	$	5,380	$	13,772
Due to related parties:
Advisor:
Asset management fees	$	—	$	5,238
Organization and offering costs		8,132,222		8,249,864
Operating expense reimbursements (including prepaid expenses)		2,782,214		2,700,703
		10,914,436		10,955,805
Manager:
Property management fees		52,848		50,912
Operating expense reimbursements		44,259		62,717
		97,107		113,629
RAI:
Internal audit fee		13,000		11,750
Operating expense reimbursements		629		14,843
		13,629		26,593
Resource Securities:
Selling commissions and dealer-manager fees		6,050		78,705
Distribution and shareholder servicing fee		1,913,360		1,818,555
		1,919,410		1,897,260
	$	12,944,582	$	12,993,287

25

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

The following table presents the Company's fees earned by and expenses incurred from such related parties:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Fees earned / expenses incurred:
Advisor:
Acquisition fees and acquisition related reimbursements (1)	$	846,397	$	-	$	1,456,067	$	1,018,719
Asset management fees (2)		459,211		212,613		874,161		310,821
Debt financing fees (3)		137,900		-		229,950		163,125
Organization and offering costs (4)		305,335		747,018		629,380		1,428,461
Operating expense reimbursement (5)		360,699		148,772		766,144		401,260
Manager:
Property management fees (2)	$	171,388	$	77,952	$	330,476	$	115,670
Construction management fees (1)		72,902		12,318		114,469		28,166
Operating expense reimbursements (6)		7,454		23,209		37,925		26,397
RAI:
Internal audit fee (5)	$	13,000	$	11,750	$	24,750	$	15,250
Resource Securities:
Selling commissions and dealer-manager fees (7)	$	277,917	$	568,559	$	1,098,082	$	1,222,695
Distribution and shareholder servicing fee (7)		71,313		305,130		495,170		659,906
Other:
The Planning & Zoning Resource Company (1)	$	1,565	$	-	$	2,716	$	1,980

(1) Capitalized and included in Rental properties, net on the consolidated balance sheets.

(2) Included in Management fees - related parties on the consolidated statements of operations and comprehensive loss.

(3) Included in Mortgage notes payable on the consolidated balance sheets.

(4) Organizational expenses were expensed when incurred and offering costs are included in Deferred offering costs until they are charged to Stockholders' equity on the consolidated balance sheets as proceeds are raised in the offering.

(5)   Included in General and administrative on the consolidated statements of operations and comprehensive loss and excludes third party costs that are advanced by the Advisor.

(6) Included in Rental operating expenses on the consolidated statements of operations and comprehensive loss.

(7) Included in Stockholders' equity on the consolidated balance sheets.

26

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

NOTE 10 - EARNINGS PER SHARE

The following table presents a reconciliation of the Company's basic and diluted earnings/(loss) per share for the periods presented:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net loss	$	(2,601,903	)	$	(1,388,450	)	$	(5,387,310	)	$	(2,214,605	)
Less: Class A common stock cash distributions declared		84,122			81,956			169,363			165,068
Less: Class T common stock cash distributions declared		121,545			119,360			244,076			235,694
Less: Class R common stock cash distributions declared		1,047,968			530,248			2,034,919			908,929
Less: Class I common stock cash distributions declared		99,443			25,556			161,764			35,241
Undistributed net loss attributable to common stockholders	$	(3,954,981	)	$	(2,145,570	)	$	(7,997,432	)	$	(3,559,537	)
Class A common stock:
Undistributed net loss attributable to Class A common    stockholders	$	(222,354	)	$	(236,156	)	$	(475,477	)	$	(437,649	)
Class A common stock cash distributions declared		84,122			81,956			169,363			165,068
Net loss attributable to Class A common stockholders	$	(138,232	)	$	(154,200	)	$	(306,114	)	$	(272,581	)
Net loss per Class A common share, basic and diluted	$	(0.22	)	$	(0.25	)	$	(0.48	)	$	(0.44	)
Weighted-average number of Class A common shares    outstanding, basic and diluted (1)		635,764			626,103			635,630			624,518
Class T common stock:
Undistributed net loss attributable to Class T    common stockholders	$	(391,026	)	$	(411,109	)	$	(834,933	)	$	(761,725	)
Class T common stock cash distributions declared		121,545			119,360			244,076			235,694
Net loss attributable to Class T common stockholders	$	(269,481	)	$	(291,749	)	$	(590,857	)	$	(526,031	)
Net loss per Class T common share, basic and diluted	$	(0.24	)	$	(0.27	)	$	(0.53	)	$	(0.48	)
Weighted-average number of Class T common shares    outstanding, basic and diluted		1,118,038			1,089,943			1,116,159			1,086,970
Class R common stock:
Undistributed net loss attributable to Class R    common stockholders	$	(3,136,689	)	$	(1,451,507	)	$	(6,325,262	)	$	(2,295,752	)
Class R common stock cash distributions declared		1,047,968			530,248			2,034,919			908,929
Net loss attributable to Class R common stockholders	$	(2,088,721	)	$	(921,259	)	$	(4,290,343	)	$	(1,386,823	)
Net loss per Class R common share, basic and diluted	$	(0.23	)	$	(0.24	)	$	(0.51	)	$	(0.42	)
Weighted-average number of Class R common shares    outstanding, basic and diluted		8,968,558			3,848,272			8,455,769			3,280,470
Class I common stock:
Undistributed net loss attributable to Class I    common stockholders	$	(204,912	)	$	(46,798	)	$	(361,760	)	$	(64,411	)
Class I common stock cash distributions declared		99,443			25,556			161,764			35,241
Net loss attributable to Class I common stockholders	$	(105,469	)	$	(21,242	)	$	(199,996	)	$	(29,170	)
Net loss per Class I common share, basic and diluted	$	(0.18	)	$	(0.16	)	$	(0.41	)	$	(0.32	)
Weighted-average number of Class I common shares    outstanding, basic and diluted		585,893			133,309			483,610			91,914

(1)Weighted-average number of shares excludes the convertible stock as they are not participating securities.

27

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

NOTE 11 - EQUITY

Preferred Stock

The Company’s charter authorizes the Company to issue 10 million shares of its $0.01 par value preferred stock. At June 30, 2019, no shares of preferred stock were issued or outstanding.

Convertible Stock

The Company’s charter authorizes the Company to issue 50,000 shares of its $0.01 par value convertible stock. On August 5, 2016, the Company's board of directors approved the issuance of 50,000 convertible shares in exchange of 5,000 shares of Class A common stock. At June 30, 2019, the Company had 50,000 shares of $0.01 par value convertible stock outstanding, which are owned by the Advisor. The convertible stock will convert into shares of the Company’s Class A common stock upon the occurrence of (a) the Company having paid distributions to common stockholders that in the aggregate equal 100% of the price at which the Company originally sold the shares plus an amount sufficient to produce a 6% cumulative, non-compounded annual return on the shares at that price; or (b) if the Company lists its common stock on a national securities exchange or the Company consummates a merger pursuant to which consideration received by the stockholders is securities of another issuer that are listed on a national securities exchange.

Each of these two events is a "Triggering Event."  Upon a Triggering Event, the Company's convertible stock will, unless its advisory agreement has been terminated or not renewed on account of a material breach by its Advisor, generally be converted into a number of shares of common stock equal to 1/50,000 of the quotient of:

(A) 15% of the amount, if any, by which

(1) the value of the Company as of the date of the event triggering the conversion plus the total distributions paid to its stockholders through such date on the then-outstanding shares of its common stock exceeds

(2) the sum of the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by

(B) the value of the Company divided by the number of outstanding shares of common stock, in each case, as of the date of the event triggering the conversion.

No triggering events have occurred as of June 30, 2019.

Common Stock

The Company’s charter authorizes the issuance of one billion shares of common stock with a par value of $0.01 per share, of which, the Company has allocated 750 million shares as Class R common stock, 75 million shares as Class I common stock, 25 million shares as Class A common stock and 25 million shares as Class T common stock. 125 million shares of the Company's $0.01 par value common stock remain undesignated. As of July 3, 2017, the Company ceased offering shares of Class A and Class T common stock and commenced the offering of Class R and Class I common stock in its primary offering.

28

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Since inception through June 30, 2019, shares of the Company's $0.01 par value Class A, Class T, Class R, and Class I common stock have been issued as follows:

	Class A					Class T					Class R					Class I
	Shares Issued			Gross Proceeds		Shares Issued			Gross Proceeds		Shares Issued			Gross Proceeds		Shares Issued		Gross Proceeds
Shared issued through primary offering (1)		586,207		$	5,601,476		1,049,996		$	9,943,465		9,051,083		$	86,943,065		612,560	$	5,649,613
Shares issued through stock dividends		12,860			—		15,495			—		—			—		—		—
Shares issued through distribution reinvestment plan		26,085			244,121		64,618			586,806		244,080			2,219,124		1,702		15,418
Shares issued in conjunction with the Advisor's initial investment, net of 5,000 share conversion		15,000			200,000		—			—		—			—		—		—
Total		640,152		$	6,045,597		1,130,109		$	10,530,271		9,295,163		$	89,162,189		614,262	$	5,665,031
Shares redeemed and retired		(16,914	)				(30,695	)				(945	)				—
Total shares issued and outstanding at June 30, 2019		623,238					1,099,414					9,294,218					614,262

(1)Includes 222,222 of Class A shares issued to RAI.

Redemptions

During the six months ended June 30, 2019, the Company redeemed shares of its outstanding Class A and Class T common stock. During the six months ended June 30, 2019, there were no redemptions of Class R or Class I common stock. Redemptions for the six months ended June 30, 2019 were as follows:

	Class A				Class T
Period	Total Number of Shares Redeemed		Average Price Paid per Share		Total Number of Shares Redeemed		Average Price Paid per Share
January 2019		—		—		—		—
February 2019		—		—		—		—
March 2019		—		—		—		—
April 2019		—		—		—		—
May 2019		—		—		—		—
June 2019		16,914	$	8.66		28,087	$	8.61
		16,914				28,087

The Company will not redeem in excess of 5% of the weighted-average number of shares of common stock outstanding during the 12-month period immediately prior to the effective date of redemption. The Company's board of directors will determine at least quarterly whether it has sufficient excess cash to repurchase shares. Generally, the cash available for redemptions will be limited to proceeds from the Company's distribution reinvestment plan plus, if the Company has positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous year.

29

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

The Company's board of directors, in its sole discretion, may suspend, terminate or amend the Company's share redemption program without stockholder approval upon 30 days' notice if it determines that such suspension, termination or amendment is in the Company's best interest. The Company's board may also reduce the number of shares purchased under the share redemption program if it determines the funds otherwise available to fund the Company's share redemption program are needed for other purposes. These limitations apply to all redemptions, including redemptions sought upon a stockholder's death, qualifying disability or confinement to a long-term care facility.

Distributions

Cash Distributions

During the three months ended June 30, 2019, the Company’s board of directors declared a cash distribution on the outstanding shares of all classes of its common stock based on daily record dates for the period from June 28, 2019 through September 27, 2019, which were or will be paid on July 31, 2019, August 30, 2019, and September 30, 2019.

The distribution was or will be calculated based on the stockholders of record each day during the period at a rate of (i) $0.001469178 per share per day, less (ii) the applicable daily distribution and shareholder servicing fees accrued for and allocable to any class of common stock divided by the number of shares of common stock of such class outstanding as of the close of business on the record date..

Distributions are generally paid to stockholders on the last business day of the month for which the distribution has accrued. Distributions reinvested pursuant to the distribution reinvestment plan are reinvested in shares of the same class as the shares on which distributions are made.

The following table presents information regarding the Company's distributions declared and paid to stockholders during the three and six months ended June 30, 2019:

	Three Months Ended June 30, 2019										Six Months Ended June 30, 2019
	Class A		Class T		Class R		Class I		Total		Class A		Class T		Class R		Class I		Total
Distributions declared	$	84,122	$	121,467	$	1,047,968	$	99,443	$	1,353,000	$	169,363	$	243,997	$	2,034,919	$	161,764	$	2,610,043
Distributions reinvested in shares of common stock paid	$	26,066	$	74,229	$	558,826	$	7,235	$	666,356	$	51,470	$	146,516	$	1,035,611	$	9,631	$	1,243,229
Cash distributions paid		59,019		48,096		418,723		70,168		596,007		115,178		92,942		764,725		115,985		1,088,830
Total distributions paid	$	85,085	$	122,325	$	977,549	$	77,403	$	1,262,363	$	166,648	$	239,459	$	1,800,336	$	125,616	$	2,332,059

At June 30, 2019, the Company had accrued approximately $1.3 million for the cash distributions paid or to be paid, in cash or DRIP shares, on July 31, 2019, August 30, 2019, and September 30, 2019, which is reported in distributions payable in the consolidated balance sheet.

NOTE 12 - FAIR VALUE MEASURES AND DISCLOSURES

In analyzing the fair value of its investments accounted for on a fair value basis, the Company follows the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company determines fair value based on quoted prices when available or, if quoted prices are not available, through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The fair value of cash, tenant receivables and accounts payable, approximate their carrying value due to their short nature. The hierarchy followed defines three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

30

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

Level 3 - Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter; depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.

The fair value of rental properties is usually estimated based on information obtained from a number of sources, including information obtained about each property as a result of pre-acquisition due diligence, marketing and leasing activities. The Company allocates the purchase price of properties to acquired tangible assets, consisting of land, buildings, fixtures and improvements, and identified intangible lease assets and liabilities, consisting of the value of above-market and below-market leases, as applicable, the value of in-place leases and the value of tenant relationships, based in each case on their fair values.

Derivatives are reported at fair value in the consolidated balance sheets and are valued by a third party pricing agent using an income approach with models that use, as their primary inputs, readily observable market parameters. This valuation process considers factors including interest rate yield curves, time value, credit and volatility factors. (Level 2).

The following table presents information about the Company's assets measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

	Level 1		Level 2		Level 3		Total
June 30, 2019
Assets:
Interest rate caps	$	—	$	199	$	—	$	199
December 31, 2018
Assets:
Interest rate caps	$	—	$	2,293	$	—	$	2,293

The carrying amount and estimated fair values of the Company’s mortgage notes payable were as follows:

	June 30, 2019				December 31, 2018
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Mortgage notes payable- outstanding borrowings	$	147,287,697	$	146,712,929	$	101,315,236	$	100,698,311

The carrying amount of the mortgage notes payable presented is the outstanding borrowings excluding deferred finance costs, net. The fair value of mortgage notes payable was estimated using rates available to the Company for debt with similar terms and remaining maturities (Level 3).

NOTE 13 - DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

31

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

As a condition to certain of the Company’s financing facilities, from time to time the Company may be required to enter into certain derivative transactions as may be required by the lender. These transactions would generally be in line with the Company’s own risk management objectives and also serve to protect the lender.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company entered into two interest rate caps that were designated as cash flow hedges. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three months ended June 30, 2019, such derivatives were used to hedge the variable cash flows, indexed to USD-LIBOR, associated with existing variable-rate loan agreements. The ineffective portion of the change in fair value of the derivatives will be recognized directly in earnings. During each of the three and six months ended June 30, 2019, the Company recorded $2,109 and $2,963, respectively, of hedge ineffectiveness in earnings. There was no hedge ineffectiveness in earnings during the three and six months ended June 30, 2018.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company's variable-rate debt. At June 30, 2019, the Company estimates that an additional $20,726 will be reclassified as an increase to interest expense over the next 12 months.

The following table presents the Company's outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk at June 30, 2019 and December 31, 2018:

	Interest Rate Derivative	Number of Instruments	Notional Amount		Maturity Dates
June 30, 2019	Interest rate caps	2	$	54,145,000	August 1, 2020 and April 1, 2021
December 31, 2018	Interest rate caps	2	$	54,145,000	August 1, 2020 and April 1, 2021

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet

The following table presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets at June 30, 2019 and December 31, 2018:

Asset Derivatives				Liability Derivatives
June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Balance Sheet	Fair Value	Balance Sheet	Fair Value	Balance Sheet	Fair Value	Balance Sheet	Fair Value
Prepaid expenses and other assets	$199	Prepaid expenses and other assets	$2,293	—	$                    —	—	$                    —

NOTE 14 - OPERATING EXPENSE LIMITATION

Under its charter, the Company must limit its total operating expenses to the greater of 2% of its average invested assets or 25% of its net income for the four most recently completed fiscal quarters, unless the conflicts committee of the Company’s board of directors has determined that such excess expenses were justified based on unusual and non-recurring factors.

Operating expenses for the four fiscal quarters ended June 30, 2019 exceeded the charter imposed limitation; however, the conflicts committee of the Company's board of directors determined that the relationship of the Company's operating expenses to its average invested assets was justified for these periods given the costs of operating a public company and the early stage of the Company's operations.

32

RESOURCE APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

JUNE 30, 2019

(unaudited)

NOTE 15 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing of these financial statements and determined no events have occurred that would require adjustments to or additional disclosure in the consolidated financial statements.

33

ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (unaudited)

The following discussion and analysis should be read in conjunction with the accompanying financial statements of Resource Apartment REIT III, Inc. and the notes thereto. See also "Cautionary Note Regarding Forward-Looking Statements" preceding Part I, as well as the notes to our financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations provided in our Annual Report on Form 10-K for the year ended December 31, 2018. As used herein, the terms "we," "our" and "us" refer to Resource Apartment REIT III, Inc., a Maryland corporation, and, as required by context, Resource Apartment REIT III OP, LP, a Delaware limited partnership, and to their subsidiaries.

Overview

Resource Apartment REIT III, Inc. is a Maryland corporation that intends to take advantage of its sponsor's multifamily investing and lending platforms to invest in apartment communities in order to provide stockholders with growing cash flow and increasing asset values. We intend to acquire underperforming apartments which we will renovate and stabilize in order to increase rents. To a lesser extent, we will also seek to originate and acquire commercial real estate debt secured by apartments. We cannot predict, however, the ultimate allocation of net proceeds from our initial public offering between property acquisitions and debt investments at this time because this allocation will depend, in part, on market conditions and opportunities and on the amount of financing that we are able to obtain with respect to the types of assets in which we seek to invest. If we are not able to raise a substantial amount of offering proceeds, our plan of operation will be scaled down considerably, and we would expect to acquire a limited number of assets. We may make adjustments to our target portfolio based on real estate market conditions and investment opportunities. We will not forego a good investment because it does not precisely fit our expected portfolio composition. Thus, to the extent that Resource REIT Advisor, LLC (our "Advisor") presents us with attractive investment opportunities that allow us to meet the real estate investment trust ("REIT") requirements under the Internal Revenue Code of 1986, as amended, our portfolio composition may vary from what we initially expect.

Results of Operations

We were formed on July 15, 2015. We commenced active real estate operations on August 19, 2016 with the acquisition of our first multifamily property. At June 30, 2019, we owned seven multifamily properties. As such, we had limited operating results during the three and six months ended June 30, 2019 and 2018.

Our management is not aware of any material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting our targeted portfolio or the U.S. apartment community industry, which may reasonably be expected to have a material impact on either capital resources or the revenues or incomes to be derived from the operation of such assets or those that we expect to acquire.

34

Three Months Ended June 30, 2019Compared to theThree Months Ended June 30, 2018

The following table sets forth the results of our operations:

	Three Months Ended June 30,
	2019			2018
Revenues:
Rental income	$	4,091,185		$	1,827,196
Total revenues		4,091,185			1,827,196
Expenses:
Rental operating - expenses		809,644			346,784
Rental operating - payroll		412,606			199,196
Rental operating - real estate taxes		579,216			182,989
Subtotal- rental operating		1,801,466			728,969
Property management fees		2,624			2,344
Management fees - related parties		630,599			290,565
General and administrative		602,250			527,348
Loss on disposal of assets		131,611			3,879
Depreciation and amortization expense		2,216,145			1,152,791
Total expenses		5,384,695			2,705,896
Loss before other income (expense)		(1,293,510	)		(878,700	)
Other income (expense):
Interest income		83,164			44,292
Interest expense		(1,391,557	)		(554,042	)
Total other income (expense)		(1,308,393	)		(509,750	)
Net loss	$	(2,601,903	)	$	(1,388,450	)

35

The following table presents the results of operations separated into two categories: property activity and company level activity for the three months ended June 30, 2019 and 2018:

	Three Months Ended June 30, 2019									Three Months Ended June 30, 2018
	Property activity			Company level activity			Total			Property activity			Company level activity			Total
Revenues:
Rental income	$	3,841,429		$	—		$	3,841,429		$	1,721,683		$	—		$	1,721,683
Utilities income		201,706			—			201,706			79,732			—			79,732
Ancillary tenant fees		48,050			—			48,050			25,781			—			25,781
Total revenues		4,091,185			—			4,091,185			1,827,196			—			1,827,196
Expenses:
Rental operating -expenses		809,644			—			809,644			346,784			—			346,784
Rental operating - payroll		412,606			-			412,606			199,196			-			199,196
Rental operating - real estate    taxes		579,216			—			579,216			182,989			—			182,989
Subtotal- rental operating		1,801,466			-			1,801,466			728,969			-			728,969
Property management fees		2,624			—			2,624			2,344			—			2,344
Management fees - related    parties		171,388			459,211			630,599			77,952			212,613			290,565
General and administrative		76,192			526,058			602,250			71,679			455,669			527,348
Loss on disposal of assets		131,611			—			131,611			3,879			—			3,879
Depreciation and amortization    expense		2,216,145			—			2,216,145			1,152,791			—			1,152,791
Total expenses		4,399,426			985,269			5,384,695			2,037,614			668,282			2,705,896
Loss before other    income (expense)		(308,241	)		(985,269	)		(1,293,510	)		(210,418	)		(668,282	)		(878,700	)
Other income (expense):
Interest income		545			82,620			83,165			20			44,272			44,292
Interest expense		(1,391,558	)		—			(1,391,558	)		(554,042	)		—			(554,042	)
Total other income (expense)		(1,391,013	)		82,620			(1,308,393	)		(554,022	)		44,272			(509,750	)
Net loss	$	(1,699,254	)	$	(902,649	)	$	(2,601,903	)	$	(764,440	)	$	(624,010	)	$	(1,388,450	)

Total revenues

Total revenues for the three months ended June 30, 2019 increased by approximately $2.3 million as compared to the three months ended June 30, 2018 due to seven properties owned at June 30, 2019 as compared to three properties owned at June 30, 2018.

Rental operating - expenses, payroll, and real estate taxes

Rental operating - expenses, payroll, and real estate taxes for the three months ended June 30, 2019 increased by approximately $1.1 million as compared to the three months ended June 30, 2018 due to seven properties owned at June 30, 2019 as compared to three properties owned at June 30, 2018.

Management fees - related parties

Management fees - related parties expense for the three months ended June 30, 2019 increased by approximately $340,000 as compared to the three months ended June 30, 2018 due to an increase in property management fees and asset management fees due to the acquisition of four additional properties.

General and administrative

General and administrative expense for the three months ended June 30, 2019 increased by approximately $75,000 as compared to the three months ended June 30, 2018 due to the acquisition of four additional properties.

36

Loss on disposal of assets

Loss on disposal of assets for the three months ended June 30, 2019 increased by approximately $128,000 as compared to the three months ended June 30, 2018 due to the timing of the replacement of appliances at our rental properties in conjunction with unit upgrades.

Depreciation and amortization

Depreciation and amortization expense for the three months ended June 30, 2019 increased by approximately $1.1 million as compared to the three months ended June 30, 2018 due to seven properties owned at June 30, 2019, with a net asset value of approximately $198.0 million as compared to three properties owned at June 30, 2018, with a net asset value of approximately $73.6 million.

Interest expense

Interest expense for the three months ended June 30, 2019 increased by approximately $838,000 as compared to the three months ended June 30, 2018 due to seven properties owned at June 30, 2019, which secured debt totaling approximately $147.3 million, as compared to three properties owned at June 30, 2018, which secured debt totaling approximately $55.7 million.

Six Months Ended June 30, 2019Compared to theSix Months Ended June 30, 2018

The following table sets forth the results of our operations:

	Six Months Ended June 30,
	2019			2018
Revenues:
Rental income	$	7,746,967		$	2,690,315
Total revenues		7,746,967			2,690,315
Expenses:
Rental operating - expenses		1,491,055			483,280
Rental operating - payroll		783,480			278,532
Rental operating - real estate taxes		1,076,447			307,192
Subtotal- rental operating		3,350,982			1,069,004
Property management fees		5,235			4,361
Management fees - related parties		1,204,637			426,491
General and administrative		1,394,922			955,120
Loss on disposal of assets		218,473			6,488
Depreciation and amortization expense		4,453,246			1,714,946
Total expenses		10,627,495			4,176,410
Loss before other income (expense)		(2,880,528	)		(1,486,095	)
Other income (expense):
Interest income		152,980			70,214
Interest expense		(2,659,762	)		(798,724	)
Total other income (expense)		(2,506,782	)		(728,510	)
Net loss	$	(5,387,310	)	$	(2,214,605	)

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The following table presents the results of operations separated into two categories: property activity and company level activity for the six months ended June 30, 2019 and 2018:

	Six Months Ended June 30, 2019									Six Months Ended June 30, 2018
	Property activity			Company level activity			Total			Property activity			Company level activity			Total
Revenues:
Rental income	$	7,224,407		$	—		$	7,224,407		$	2,544,864		$	—		$	2,544,864
Utility income		418,424			—			418,424			114,205			—			114,205
Ancillary tenant fees		104,136			—			104,136			31,246			—			31,246
Total revenues		7,746,967			—			7,746,967			2,690,315			—			2,690,315
Expenses:
Rental operating - expenses		1,491,053			—			1,491,053			483,280			—			483,280
Rental operating - payroll		783,480			-			783,480			277,262			1,270			278,532
Rental operating - real estate    taxes		1,076,448			—			1,076,448			307,192			—			307,192
Subtotal- rental operating		3,350,981			-			3,350,981			1,067,734			1,270			1,069,004
Property management fees		5,237			—			5,237			4,361			—			4,361
Management fees - related    parties		330,475			874,161			1,204,636			115,670			310,821			426,491
General and administrative		176,128			1,218,794			1,394,922			92,121			862,999			955,120
Loss on disposal of assets		218,473			—			218,473			6,488			—			6,488
Depreciation and amortization    expense		4,453,245			—			4,453,245			1,714,946			—			1,714,946
Total expenses		8,534,539			2,092,955			10,627,494			3,001,320			1,175,090			4,176,410
Loss before other    income (expense)		(787,572	)		(2,092,955	)		(2,880,527	)		(311,005	)		(1,175,090	)		(1,486,095	)
Other income (expense):
Other income		562			152,418			152,980			190			70,024			70,214
Interest income		(2,659,763	)		—			(2,659,763	)		(798,724	)		—			(798,724	)
Interest expense		(2,659,201	)		152,418			(2,506,783	)		(798,534	)		70,024			(728,510	)
Net loss	$	(3,446,773	)	$	(1,940,537	)	$	(5,387,310	)	$	(1,109,539	)	$	(1,105,066	)	$	(2,214,605	)

Total revenues

Total revenues for the six months ended June 30, 2019 increased by approximately $5.1 million as compared to the six months ended June 30, 2018 due to seven properties owned at June 30, 2019 as compared to three properties owned at June 30, 2018.

Rental operating - expenses, payroll, and real estate taxes

Rental operating - expenses, payroll, and real estate taxes for the six months ended June 30, 2019 increased by approximately $2.3 million as compared to the six months ended June 30, 2018 due to seven properties owned at June 30, 2019 as compared to three properties owned at June 30, 2018.

Management fees - related parties

Management fees - related parties expense for the six months ended June 30, 2019 increased by approximately $778,000 as compared to the six months ended June 30, 2018 due to an increase in property management fees and asset management fees due to the acquisition of four additional properties.

General and administrative

General and administrative expense for the six months ended June 30, 2019 increased by approximately $440,000 as compared to the six months ended June 30, 2018 due to the acquisition of four additional properties, as well as increases in professional fees.

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Loss on disposal of assets

Loss on disposal of assets for the six months ended June 30, 2019 increased by approximately $212,000 as compared to the six months ended June 30, 2018 due to the timing of the replacement of appliances at our rental properties in conjunction with unit upgrades.

Depreciation and amortization

Depreciation and amortization expense for the six months ended June 30, 2019 increased by approximately $2.7 million as compared to the six months ended June 30, 2018 due to seven properties owned at June 30, 2019, with a net asset value of approximately $198.0 million as compared to three properties owned at June 30, 2018, with a net asset value of approximately $73.6 million.

Interest expense

Interest expense for the six months ended June 30, 2019 increased by approximately $1.9 million as compared to the six months ended June 30, 2018 due to seven properties owned at June 30, 2019, which secured debt totaling approximately $147.3 million, as compared to three properties owned at June 30, 2018, which secured debt totaling approximately $55.7 million.

Liquidity and Capital Resources

We are offering and selling to the public in our public offering up to $1.1 billion in shares of common stock, consisting of up to $1.0 billion of shares in our primary offering and up to $100.0 million of shares pursuant to our distribution reinvestment plan ("DRIP").

Through July 2, 2017, we offered shares of Class A and Class T common stock in our primary and DRIP offering. As of July 3, 2017, we ceased offering shares of Class A and Class T common stock in our primary offering and commenced offering shares of Class R and Class I common stock in both the primary and DRIP offering.

On June 27, 2018 and March 21, 2019, our board of directors determined an estimated net asset value (“NAV”) per share of the common stock of $9.05 and $9.12, respectively, based on the estimated market value of the portfolio of our investments as of March 31, 2018 and December 31, 2018, respectively.  Based on the estimated NAV per share, our board of directors established updated offering prices for shares of Class R and Class I common stock to be sold in the primary portion of our initial public offering by adding certain offering costs to the estimated NAV per share.  Pursuant to the terms of the DRIP, following the establishment of an estimated NAV per share, shares of common stock are sold at the most recent estimated NAV per share.

The prices per share for each class of shares of our common stock through March 31, 2019 were as follows:

	Class A		Class T		Class R		Class I
Primary Offering Price
Inception through July 2, 2017	$	10.00	$	9.47	n/a		n/a
July 3, 2017 through July 1, 2018	n/a		n/a		$	9.52	$	9.13
July 2, 2018 through March 24, 2019	n/a		n/a		$	9.68	$	9.28
March 25, 2019 through June 30, 2019	n/a		n/a		$	9.75	$	9.35
Offering Price under the DRIP
Inception through July 2, 2017	$	9.60	$	9.09	n/a		n/a
July 3, 2017 through July 1, 2018	$	9.60	$	9.09	$	9.14	$	8.90
July 2, 2018 through March 24, 2019 (1)	$	9.05	$	9.05	$	9.05	$	9.05
March 25, 2019 through June 30, 2019 (1)	$	9.12	$	9.12	$	9.12	$	9.12

(1) Shares of common stock pursuant to our DRIP are sold at our most estimated NAV per share.

We anticipate deriving the capital required to purchase real estate investments and conduct our operations from the proceeds of our initial public offering and any future offerings we may conduct, from secured or unsecured financings from banks or other lenders and from proceeds from the sale of assets. In addition, our Advisor has and will advance funds to us for certain accrued organization and offering costs. As of June 30, 2019, we have purchased seven properties using both offering proceeds and debt financing.

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If we are unable to raise substantial funds in the offering, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us will fluctuate with the performance of the specific assets we acquire. Further, we will have certain fixed operating expenses, including certain expenses as a publicly offered REIT, regardless of whether we are able to raise substantial funds in our offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions. As of June 30, 2019, we have raised approximately $108.3 million in our public offering.

We intend to make reserve allocations as necessary to aid our objective of preserving capital for our investors by supporting the maintenance and viability of properties we acquire in the future. If reserves and any other available income become insufficient to cover our operating expenses and liabilities, it may be necessary to obtain additional funds by borrowing, refinancing properties or liquidating our investment in one or more properties, debt investments or other assets we may hold. We cannot assure you that we will be able to access additional funds when we need them or upon acceptable terms.

Capital Expenditures

We deployed a total of approximately $2.8 million during the six months ended June 30, 2019 for capital expenditures:

Multifamily Community	Capital deployed during six months ended June 30, 2019		Remaining capital budgeted
Payne Place	$	-	$	33,801
Bay Club		256,963		842,883
Tramore Village		845,108		2,189,796
Matthews		654,195		2,215,487
Kensington		652,522		1,466,351
Wimbledon Oaks		403,268		2,016,406
Summit		-		2,821,855
	$	2,812,056

Gross offering proceeds

At June 30, 2019, shares of our $0.01 par value Class A, Class T, Class R, and Class I common stock have been issued as follows:

	Class A					Class T					Class R					Class I
	Shares Issued			Gross Proceeds		Shares Issued			Gross Proceeds		Shares Issued			Gross Proceeds		Shares Issued		Gross Proceeds
Shared issued through primary offering (1)		586,207		$	5,601,476		1,049,996		$	9,943,465		9,051,083		$	86,943,065		612,560	$	5,649,613
Shares issued through stock dividends		12,860			—		15,495			—		—			—		—		—
Shares issued through distribution reinvestment plan		26,085			244,121		64,618			586,806		244,080			2,219,124		1,702		15,418
Shares issued in conjunction with the Advisor's initial investment, net of 5,000 share conversion		15,000			200,000		—			—		—			—		—		—
Total		640,152		$	6,045,597		1,130,109		$	10,530,271		9,295,163		$	89,162,189		614,262	$	5,665,031
Shares redeemed and retired		(16,914	)				(30,695	)				(945	)				—
Total shares issued and outstanding at June 30, 2019		623,238					1,099,414					9,294,218					614,262

(1)Includes 222,222of Class A shares issued to RAI.

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Mortgage Debt

The following table presents a summary of our mortgage notes payable, net:

	June 30, 2019							December 31, 2018
Collateral	Outstanding Borrowings		Deferred Financing Costs, net			Carrying Value		Outstanding borrowings		Deferred Financing Costs, net			Carrying Value
Payne Place		1,542,697	$	(29,283	)	$	1,513,414	$	1,560,236	$	(30,220	)	$	1,530,016
Bay Club		21,520,000		(232,127	)		21,287,873		21,520,000		(255,957	)		21,264,043
Tramore Village		32,625,000		(334,217	)		32,290,783		32,625,000		(363,784	)		32,261,216
Matthews Reserve		23,850,000		(291,348	)		23,558,652		23,850,000		(315,236	)		23,534,764
The Park at Kensington		21,760,000		(282,523	)		21,477,477		21,760,000		(305,399	)		21,454,601
Wimbledon Oaks		18,410,000		(254,804	)		18,155,196		—		—			—
Summit		27,580,000		(444,129	)		27,135,871		—		—			—
Total	$	147,287,697	$	(1,868,432	)	$	145,419,265	$	101,315,236	$	(1,270,596	)	$	100,044,640

For maturity dates, related interest rates, monthly debt service, and monthly escrow payments, see Note 8 of the notes to our consolidated financial statements.

As of June 30, 2019, the weighted average interest rate of all our outstanding indebtedness was 4.21%.

Although there is no limit on the amount we can borrow to acquire a single real estate investment, we may not leverage our assets with debt financing such that our borrowings are in excess of 300% of our net assets unless a majority of our independent directors find substantial justification for borrowing a greater amount. Examples of such a substantial justification include, without limitation, obtaining funds for the following: (i) to repay existing obligations, (ii) to pay sufficient distributions to maintain REIT status, or (iii) to buy an asset where an exceptional acquisition opportunity presents itself and the terms of the debt agreement and the nature of the asset are such that the debt does not increase the risk that we would become unable to meet our financial obligations as they became due. On a total portfolio basis, however, based on current lending market conditions, we expect to leverage our assets in an amount equal to 55% to 60% of the cost of our assets.

We may finance the acquisition costs of individual real estate investments, as well as the acquisition costs of all or a group of real estate investments acquired by us, by causing our subsidiaries to borrow directly from third-party financial institutions or other commercial lenders. Under these circumstances, our Advisor anticipates that certain properties acquired will serve as collateral for the debt we incur to acquire those particular properties and that we will seek to obtain nonrecourse financing for the acquisition of the properties. However, there is no guarantee that our Advisor will be successful in obtaining financing arrangements on a property-by-property basis and that the loans would be nonrecourse to us. Additionally, we may obtain corporate-level financing through a line of credit from third-party financial institutions or other commercial lenders. Our assets will serve as collateral for this type of debt incurred to acquire real estate investments. We may also obtain seller financing with respect to specific assets that we acquire.

Organization and Offering Costs

We incur organization and offering costs in pursuit of our capital raise. Our organization and offering costs (other than selling commissions, the dealer manager fees and distribution and shareholder servicing fees) are initially being paid by the Advisor on our behalf. Organization costs include all expenses that we incur in connection with our formation, including but not limited to legal fees and other costs to incorporate.

Pursuant to the advisory agreement, we will be obligated to reimburse the Advisor for organization and offering costs paid by the Advisor on our behalf, up to an amount equal to 4.0% of gross offering proceeds as of the termination of this offering if we raise less than $500.0 million in the primary offering, and 2.5% of gross offering proceeds as of the termination of this offering if we raise $500.0 million or more in the primary offering. However, if we raise the maximum offering amount in the primary offering, we expect organization and offering expenses (other than selling commissions, the dealer manager fee and the distribution and shareholder servicing fee) to be approximately $10.0 million or 1% of gross offering proceeds. These organization and offering expenses include all actual expenses (other than selling commissions, the dealer manager fee and the

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distribution and shareholder servicing fee), including reimbursements to our Advisor for the portion of named executive officer salaries allocable to activities related to this offering, to be incurred on our behalf and paid by us in connection with the offering.

On April 13, 2018, our board of directors approved an amendment to the advisory agreement that provides that we are not responsible for the reimbursement of any unreimbursed organization and offering expenses or operational expenses incurred by our Advisor on our behalf through March 31, 2018 until after the termination of the primary portion of our ongoing initial public offering. Additionally, the amendment provides that such unreimbursed organization and offering expenses or operational expenses incurred or paid by our Advisor on our behalf through March 31, 2018 will be reimbursed ratably starting after the termination of the primary portion of our ongoing initial public offering through April 30, 2021 for organization and offering expenses and through April 30, 2020 for operating expenses.

As of June 30, 2019, we have incurred approximately $9.1 million for public offering costs consisting of accounting, advertising, allocated payroll, due diligence, marketing, legal and similar costs. As of June 30, 2019, our Advisor has advanced approximately $8.1 million of these costs on our behalf and we have paid approximately $249,000 of these costs directly and reimbursed approximately $747,000 to our Advisor.

As of June 30, 2019, we have charged approximately $4.3 million of offering costs to equity, which represents the portion of deferred offering costs allocated to each share of common stock sold in the public offering. Deferred offering costs of $4.8 million represent the portion of the total offering costs incurred that have not yet been charged to equity. Upon completion of the public offering, any deferred offering costs in excess of the limit on organization and offering costs discussed above, will not be payable to our Advisor.

Organization costs, which include all expenses incurred by us in connection with our formation, including but not limited to legal fees and other costs to incorporate, are expensed as incurred. There can be no assurance that our plans to raise capital will be successful.

Outstanding Class T shares issued in our primary offering are subject to an annual distribution and shareholder servicing fee in the amount of 1% of the estimated NAV of the share (1% of purchase price prior to June 29, 2018) for five years from the date on which such share is issued. We will cease paying the distribution and shareholder servicing fee on each Class T share prior to the fifth anniversary of its issuance on the earliest of the following, should any of these events occur: (i) the date at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from our primary offering (i.e., excluding proceeds from sales pursuant to our DRIP); (ii) the date on which we list our common stock on a national securities exchange; and (iii) the date of a merger or other extraordinary transaction in which we are a party and in which our common stock is exchanged for cash or other securities. We cannot predict if or when any of these events will occur.

Outstanding Class R shares issued in our primary offering are also subject to an annual distribution and shareholder servicing fee in the amount of 1% of the estimated NAV of the share (1% of purchase price prior to June 29, 2018).We will cease paying the distribution and shareholder servicing fee with respect to Class R shares held in any particular account, and those Class R shares will convert into a number of Class I shares determined by multiplying each Class R share to be converted by the applicable "Conversion Rate," on the earlier of (i) the date after the termination of the primary offering at which, in the aggregate, underwriting compensation from all sources equals 10% of the gross proceeds from our primary offering; (ii) a listing of the Class I shares on a national securities exchange; (iii) a merger or consolidation of the company with or into another entity, or the sale or other disposition of all or substantially all of our assets; and (iv) the end of the month in which the total underwriting compensation (which consists of selling commissions, dealer manager fees and distribution and shareholder servicing fees) paid with respect to such Class R shares purchased in a primary offering is not less than 8.5% (or a lower limit, provided that, in the case of a lower limit, the agreement between the Dealer Manager and the broker-dealer in effect at the time Class R shares were first issued to such account sets forth the lower limit and the Dealer Manager s advises our transfer agent of the lower limit in writing) of the gross offering price of those Class R shares purchased in such primary offering (excluding shares purchased through our distribution reinvestment plan).

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We record the distribution and shareholder servicing fees as a reduction to additional paid-in capital and the related liability in an amount equal to the maximum fees payable in relation to the Class T and Class R shares on the date the shares are issued. The liability will be relieved over time, as the fees are paid to the Dealer Manager, or as the fees are adjusted (if the fees are no longer payable pursuant to the conditions described above). For issued Class T shares, we have accrued an estimate of the total distribution and shareholder servicing fees of $465,638 for the full five year period at June 30, 2019, of which we paid $207,141 cumulatively through June 30, 2019. For issued Class R shares, we have accrued an estimate of the total distribution and shareholder servicing fees of $2.4 million at June 30, 2019, of which we paid $753,435 cumulatively through June 30, 2019. The total accrual of approximately $1.9 million is included in due to related parties on our consolidated balance sheet at June 30, 2019.

Acquisition and Asset Management Costs

In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make payments to our Advisor. During our acquisition stage, we expect to make payments to our Advisor in connection with the acquisition of real estate investments. In addition, we expect to continue to make payments to our Advisor for the management of our assets and costs incurred by our Advisor in providing services to us.

Operating Expenses

At the end of each fiscal quarter, our Advisor must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income, unless the conflicts committee of our board of directors has determined that such excess expenses were justified based on unusual and non-recurring factors.

Operating expenses for the four fiscal quarters ended June 30, 2019 exceeded the charter imposed limitation; however, the conflicts committee determined that the relationship of our operating expenses to our average invested assets was justified for these periods given the costs of operating a public company and the early stage of our operations.

"Average invested assets" means the average monthly book value of our assets invested, directly or indirectly, in equity interests in and loans secured by real estate during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. "Total operating expenses" means all expenses paid or incurred by us, as determined under accounting principles generally accepted in the United States ("GAAP"), that are in any way related to our operation, including advisory fees, but excluding (i) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of our stock; (ii) interest payments; (iii) taxes; (iv) non-cash expenditures such as depreciation, amortization and bad debt reserves; (v) incentive fees paid in accordance with the NASAA Statement of Policy Regarding Real Estate Investment Trusts (the "NASAA REIT Guidelines"); (vi) acquisition fees and expenses (including expenses relating to potential investments that we do not close); (vii) real estate commissions on the sale of property; and (viii) other fees and expenses connected with the acquisition, disposition, management and ownership of real estate interests, loans or other property (such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property).

Distributions

Cash Distributions

For the three and six months ended June 30, 2019, we declared and paid aggregate distributions, which were paid from operating activities, debt financing, and offering proceeds, as follows:

	Three Months Ended June 30, 2019										Six Months Ended June 30, 2019
	Class A		Class T		Class R		Class I		Total		Class A		Class T		Class R		Class I		Total
Distributions declared	$	84,122	$	121,467	$	1,047,968	$	99,443	$	1,353,000	$	169,363	$	243,997	$	2,034,919	$	161,764	$	2,610,043
Distributions reinvested in shares of common stock paid	$	26,066	$	74,229	$	558,826	$	7,235	$	666,356	$	51,470	$	146,516	$	1,035,611	$	9,631	$	1,243,229
Cash distributions paid		59,019		48,096		418,723		70,168		596,007		115,178		92,942		764,725		115,985		1,088,830
Total distributions paid	$	85,085	$	122,325	$	977,549	$	77,403	$	1,262,363	$	166,648	$	239,459	$	1,800,336	$	125,616	$	2,332,059

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At June 30, 2019, we had accrued $1.3 million for the cash distributions paid or to be paid, in cash or DRIP shares, on July 31, 2019, August 30, 2019, and September 30, 2019, which is reported in distributions payable in the consolidated balance sheet and included in the distributions declared above.

Distributions paid, distributions declared and sources of distributions paid were as follows for the six months ended June 30, 2019:

	Distributions Paid									Distributions Declared				Sources of Distributions Paid
														Operating Activities	Offering Proceeds	Debt Financing
2019	Cash		Distributions Reinvested (DRIP)		Total		Cash Provided by/ (Used in) Operating Activities			Total		Per Share(1)		Amount Paid / Percent of Total	Amount Paid / Percent of Total	Amount Paid / Percent of Total
First quarter	$	492,823	$	576,873	$	1,069,696	$	(254,605	)	$	1,257,043	$	0.134	- / -	$1,069,696 / 100%	- / -
Second quarter		596,007		666,356		1,262,363		(164,958	)		1,353,000		0.135	- / -	1,262,363 / 100%	- / -
Total	$	1,088,830	$	1,243,229	$	2,332,059	$	(419,563	)	$	2,610,043

(1)Distributions for Class T and Class R shareholders were reduced for the distribution and shareholder servicing fee.

Cash distributions paid since inception were as follows:

Fiscal Period Paid	Per Share (1)	Distributions Reinvested in Shares of Common Stock		Net Cash Distributions		Total Aggregate Distributions
12 months ended December 31, 2016	$0.000547945 per day	$	4,380	$	11,524	$	15,904
Seven months ended July 31, 2017	$0.000547945 per day		41,012		47,682		88,694
Five months ended December 31, 2017	$0.001434521 per day		248,431		227,843		476,274
Six months ended June 30, 2018	$0.001434521 per day		605,527		496,157		1,101,684
Six months ended December 31, 2018	$0.001458630 per day		922,889		780,864		1,703,753
Three months ended March 31, 2019	$0.001458630 per day		576,873		492,823		1,069,696
Three months ended June 30, 2019	$0.001469178 per day		666,356		596,007		1,262,363
		$	3,065,468	$	2,652,900	$	5,718,368

(1)Distributions for Class T and Class R shareholders were reduced for the distribution and shareholder servicing fee.

Our net loss attributable to common stockholders for the six months ended June 30, 2019 was approximately $5.4 million and net cash used in operating activities was $419,563. Our cumulative cash distributions and net loss attributable to common stockholders from inception through June 30, 2019 are approximately $5.7 million and approximately $16.1 million, respectively. We have funded our cumulative distributions, which include net cash distributions and distributions reinvested by stockholders, with cash flows from operating activities, proceeds from our public offering and proceeds from debt financing. To the extent that we pay distributions from sources other than our cash flow from operating activities, we will have fewer funds available for investment in commercial real estate and real estate-related debt, the overall return to our stockholders may be reduced and subsequent investors may experience dilution.

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Funds from Operations and Modified Funds from Operations

Funds from operations, or FFO, is a non-GAAP financial performance measure that is widely recognized as a measure of REIT operating performance. We use FFO as defined by the National Association of Real Estate Investment Trusts to be net income (loss), computed in accordance with GAAP excluding extraordinary items, as defined by GAAP, and gains (or losses) from sales of property (including deemed sales and settlements of pre-existing relationships), plus depreciation and amortization on real estate assets, and after related adjustments for unconsolidated partnerships, joint ventures and subsidiaries and noncontrolling interests. We believe that FFO is helpful to our investors and our management as a measure of operating performance because it excludes real estate-related depreciation and amortization, gains and losses from property dispositions, and extraordinary items, and as a result, when compared year to year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, which are not immediately apparent from net income. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate and intangibles diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient. As a result, our management believes that the use of FFO, together with the required GAAP presentations, is helpful for our investors in understanding our performance. Factors that impact FFO include start-up costs, fixed costs, delay in buying assets, lower yields on cash held in accounts, income from portfolio properties and other portfolio assets, interest rates on acquisition financing and operating expenses.

Since FFO was promulgated, GAAP has adopted several new accounting pronouncements, such that management and many investors and analysts have considered the presentation of FFO alone to be insufficient. Accordingly, in addition to FFO, we use modified funds from operations, or MFFO, as defined by the Institute for Portfolio Alternatives, or IPA. MFFO excludes from FFO the following items:

(1) acquisition fees and expenses (incurred prior to January 1, 2018, as explained below);

(2) straight-line rent amounts, both income and expense;

(3) amortization of above- or below-market intangible lease assets and liabilities;

(4) amortization of discounts and premiums on debt investments;

(5) impairment charges;

(6) gains or losses from the early extinguishment of debt;

(7) gains or losses on the extinguishment or sales of hedges, foreign exchange, securities and other derivatives holdings except where the trading of such instruments is a fundamental attribute of our operations;

(8) gains or losses related to fair-value adjustments for derivatives not qualifying for hedge accounting, including interest rate and foreign exchange derivatives;

(9) gains or losses related to consolidation from, or deconsolidation to, equity accounting;

(10) gains or losses related to contingent purchase price adjustments; and

(11) adjustments related to the above items for unconsolidated entities in the application of equity accounting.

We believe that MFFO is helpful in assisting management assess the sustainability of operating performance in future periods and, in particular, after our offering and acquisition stages are complete, primarily because, prior to January 1, 2018, as explained below, it excluded acquisition expenses that affect property operations only in the period in which the property is acquired. Thus, MFFO provides helpful information relevant to evaluating our operating performance in periods in which there is no acquisition activity.

As explained below, management’s evaluation of our operating performance excludes the items considered in the calculation based on the following economic considerations. Many of the adjustments in arriving at MFFO are not applicable to us. Nevertheless, we explain below the reasons for each of the adjustments made in arriving at our MFFO definition:

• Acquisition expenses. In evaluating investments in real estate, including both business combinations and investments accounted for under the equity method of accounting, management’s investment models and analysis differentiate costs to acquire the investment from the operations derived from the investment. Under current GAAP, acquisition costs related to business combinations are expensed and are capitalized for asset acquisitions.  Prior to January 1, 2018, all of our acquisitions were accounted for as business combinations and their related costs were expensed.  On January 1, 2018, we adopted Financial Accounting Standards Board Accounting Standards Update No. 2017-01, and we anticipate that most property acquisitions will be treated as asset acquisitions and the related costs will be capitalized.  Acquisition costs will continue to be funded from both the proceeds of debt financing and the proceeds of property dispositions, not from cash flows from operations.  We believe that by excluding expensed acquisition costs, MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties.  Acquisition expenses include those costs paid to our Advisor or third parties.

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• Adjustments for straight-line rents and amortization of discounts and premiums on debt investments. In the proper application of GAAP, rental receipts and discounts and premiums on debt investments are allocated to periods using various systematic methodologies. This application will result in income recognition that could be significantly different than underlying contract terms. By adjusting for these items, MFFO provides useful supplemental information on the realized economic impact of lease terms and debt investments and aligns results with management’s analysis of operating performance.

• Adjustments for amortization of above or below market intangible lease assets. Similar to depreciation and amortization of other real estate related assets that are excluded from FFO, GAAP implicitly assumes that the value of intangibles diminishes predictably over time and that these charges be recognized currently in revenue. Since real estate values and market lease rates in the aggregate have historically risen or fallen with market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the performance of the real estate.

• Impairment charges, gains or losses related to fair-value adjustments for derivatives not qualifying for hedge accounting and gains or losses related to contingent purchase price adjustments. Each of these items relates to a fair value adjustment, which is based on the impact of current market fluctuations and underlying assessments of general market conditions and specific performance of the holding which may not be directly attributable to current operating performance. As these gains or losses relate to underlying long-term assets and liabilities, management believes MFFO provides useful supplemental information by focusing on the changes in our core operating fundamentals rather than changes that may reflect anticipated gains or losses. In particular, because GAAP impairment charges are not allowed to be reversed if the underlying fair values improve or because the timing of impairment charges may lag the onset of certain operating consequences, we believe MFFO provides useful supplemental information related to current consequences, benefits and sustainability related to rental rate, occupancy and other core operating fundamentals.

• Adjustment for gains or losses related to early extinguishment of hedges, debt, consolidation or deconsolidation and contingent purchase price. Similar to extraordinary items excluded from FFO, these adjustments are not related to continuing operations. By excluding these items, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods and to other real estate operators.

By providing MFFO, we believe we are presenting useful information that also assists investors and analysts in the assessment of the sustainability of our operating performance after our offering and acquisition stages are completed. We also believe that MFFO is a recognized measure of sustainable operating performance by the real estate industry. MFFO is useful in comparing the sustainability of our operating performance after our acquisition stage is completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities or as affected by other MFFO adjustments. However, investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering and acquisition stages are completed, as it excludes acquisition costs that have a negative effect on our operating performance and the reported book value of our common stock and stockholders’ equity during the periods in which properties are acquired.

Neither FFO nor MFFO should be considered as an alternative to net income attributable to common stockholders, nor is an indication of our liquidity, nor are any of these measures indicative of funds available to fund our cash needs, including our ability to fund distributions. In particular, as we intend to continue to acquire properties as part of our ongoing operations, acquisition costs and other adjustments that are increases to MFFO are, and may continue to be, a significant use of cash. Accordingly, FFO and MFFO should be reviewed in connection with other GAAP measurements. Our FFO and MFFO as presented may not be comparable to amounts calculated by other REITs.

The following section presents our calculation of FFO and MFFO and provides additional information related to our operations:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net loss attributable to common    stockholders - GAAP	$	(2,601,903	)	$	(1,388,450	)	$	(5,387,310	)	$	(2,214,605	)
Depreciation expense		1,747,306			715,940			3,345,339			998,662
FFO attributable to common stockholders		(854,597	)		(672,510	)		(2,041,971	)		(1,215,943	)
Adjustments for straight-line rents		13,498			5,513			11,243			6,458
Amortization of intangible lease assets		468,839			436,851			1,107,906			716,284
MFFO attributable to common stockholders	$	(372,260	)	$	(230,146	)	$	(922,822	)	$	(493,201	)

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Critical Accounting Policies

For a discussion of our critical accounting policies and estimates, see the discussion in our Annual Report on Form 10-K for the year ended December 31, 2018 under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies."

Subsequent Events

We have evaluated subsequent events and determined that no events have occurred, which would require an adjustment to or additional disclosure in the consolidated financial statements.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosures about market risk have been omitted as permitted under rules applicable to smaller reporting companies.

ITEM 4.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision of our principal executive officer and principal financial officer, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective as of June 30, 2019.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the quarter endedJune 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

From time to time, we may become party to legal proceedings, which arise in the ordinary course of our business. We are not currently involved in any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by governmental authorities.

ITEM 1A.    RISK FACTORS

Risk factors have been omitted as permitted under rules applicable to smaller reporting companies.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

During the period covered by this report, we did not sell any unregistered securities.

Use of Proceeds

On April 28, 2016, our Registration Statement on Form S-11 (File No. 333-207740), covering our initial public offering of up to $1.1 billion in shares of common stock, was declared effective under the Securities Act of 1933. We retained Resource Securities LLC (our "Dealer Manager") as the dealer manager for our offering.

We expect to offer shares of common stock in the primary offering until the registration statement relating to our proposed follow-on offering is declared effective by the Securities and Exchange Commission.

We are offering up to $1.1 billion of shares of our common stock, consisting of up to $1.0 billion of shares in our primary offering and up to $100.0 million of shares pursuant to our DRIP.

Through July 2, 2017, we offered shares of Class A and Class T common stock in our primary and DRIP offering. As of July 3, 2017, we ceased offering shares of Class A and Class T common stock in our primary offering and commenced offering shares of Class R and Class I common stock in both the primary and DRIP offering.

On June 27, 2018 and March 21, 2019, our board of directors determined an estimated net asset value (“NAV”) per share of the common stock of $9.05 and $9.12, respectively, based on the estimated market value of the portfolio of our investments as of March 31, 2018 and December 31, 2018, respectively.  Based on the estimated NAV per share, our board of directors established updated offering prices for shares of Class R and Class I common stock to be sold in the primary portion of our initial public offering by adding certain offering costs to the estimated NAV per share.  Pursuant to the terms of the DRIP, following the establishment of an estimated NAV per share, shares of common stock are sold at the most recent estimated NAV per share.

The prices per share for each class of shares of our common stock through June 30, 2019 were as follows:

	Class A		Class T		Class R		Class I
Primary Offering Price
Inception through July 2, 2017	$	10.00	$	9.47	n/a		n/a
July 3, 2017 through July 1, 2018	n/a		n/a		$	9.52	$	9.13
July 2, 2018 through March 24, 2019	n/a		n/a		$	9.68	$	9.28
March 25, 2019 through June 30, 2019	n/a		n/a		$	9.75	$	9.35
Offering Price under the DRIP
Inception through July 2, 2017	$	9.60	$	9.09	n/a		n/a
July 3, 2017 through July 1, 2018	$	9.60	$	9.09	$	9.14	$	8.90
July 2, 2018 through March 24, 2019 (1)	$	9.05	$	9.05	$	9.05	$	9.05
March 25, 2019 through June 30, 2019 (1)	$	9.12	$	9.12	$	9.12	$	9.12

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(1)Shares of common stock pursuant to our DRIP are sold at our most estimated NAV per share.

At June 30, 2019, a total of 601,207 Class A shares, including shares purchased by both our Advisor and RAI, 1,049,996 Class T shares, 9,051,083 Class R shares and 612,561 Class I shares of common stock have been issued in connection with our public offering resulting in gross offering proceeds of approximately $108.3 million. From the commencement of our public offering through June 30, 2019, we incurred selling commissions, dealer manager fees, other underwriting compensation and other organization and offering costs in the amounts set forth below. We generally paid selling commissions and dealer manager fees to our Dealer Manager for the sale of shares in our primary offering and our Dealer Manager reallowed all selling commissions and a portion of the dealer manager fees to participating broker-dealers. In addition, we reimburse our Advisor and Dealer Manager for certain organizational and offering costs.

Type of Expense	Amount
Selling commissions	$	2,470,734
Dealer manager fees		3,193,004
Distribution and shareholder servicing fee (1)		2,873,936
Other organization and offering costs (2)		4,333,505
Total expenses	$	12,871,178

(1) Outstanding Class T and R shares issued in our primary offering are subject to a 1% annual distribution and shareholder servicing fee from the date on which each share is issued. Such fees are not paid from offering proceeds and do not reduce the amount of net offering proceeds to us. At June 30, 2019, $1,913,072.4 of these fees are unpaid and included in due to related parties on our consolidated balance sheets.

(2) At June 30, 2019, this amount is included in due to related parties on the consolidated balance sheets.

From the commencement of our initial public offering through June 30, 2019, the net offering proceeds to us, after deducting the total expenses incurred as described above, excluding the distribution and shareholder servicing fee as such fees do not reduce the net offering proceeds to us, were approximately $98.3 million. As of June 30, 2019, we have used the net proceeds from our ongoing initial public offering and debt financing to acquire approximately$199.9 million in real estate investments. Of the amount used for the purchase of these investments, approximately $4.4 million was paid to our Advisor as acquisition fees and approximately $238,000 was paid to other affiliates for acquisition expense reimbursements.

Share Redemption Program

Our common stock is currently not listed on a national securities exchange and we will not seek to list our common stock unless and until such time as our Board determines that the listing of our common stock would be in the best interests of our stockholders. In order to provide stockholders with the benefit of some interim liquidity, our Board has adopted a share repurchase program that enables our stockholders to sell their shares back to us after they have held them for at least one year, subject to significant conditions and limitations. The terms of our share repurchase program are more flexible in cases involving the death or disability of a stockholder.

We may reject any request for repurchase of shares. Repurchases of shares of our common stock, when requested, generally will be made quarterly. We limit the number of shares repurchased during any calendar year to 5.0% of the weighted-average number of shares of common stock outstanding during the 12-month period immediately prior to the effective date of redemption. In addition, we are only authorized to repurchase shares using proceeds from our DRIP plus 1.0% of the operating cash flow from the previous fiscal year (to the extent positive). Due to these limitations, we cannot guarantee that we will be able to accommodate all repurchase requests.

A stockholder must have beneficially held the shares for at least one year prior to offering them for sale to us through our share repurchase program, unless the shares are being repurchased in connection with a stockholder’s death, qualifying disability, or certain other involuntary exigent circumstances, in which our Board reserves the right, in its sole discretion, at any time and from time to time, to waive the one-year holding period requirement.

Prior to June 29, 2018, shares repurchased in connection with a stockholder’s death or qualifying disability were repurchased at a price per share equal to 100% of the amount the stockholder paid for each share, subject to any special distributions previously made to our stockholders. Effective June 29, 2018, shares repurchased in connection with a stockholder’s death or qualifying disability are repurchased at a price per share equal to 100% of the current NAV.

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Shares repurchased in connection with a stockholder’s other involuntary exigent circumstances, such as bankruptcy or a mandatory distribution requirement under a stockholder’s IRA, within one year from the purchase date, will be repurchased at a price per share equal to the price per share we would pay had the stockholder held the shares for one year from the purchase date, and at all other times in accordance with the terms described below.

Notwithstanding the foregoing, prior to June 29, 2018, shares received as a stock dividend were redeemed at a purchase price of $0.00.  Effective June 29, 2018, shares received as a stock dividend are redeemed at the redemption price applicable to that stockholder’s initial share purchase anniversary.

Unless the shares of our common stock were repurchased in connection with a stockholder’s death or qualifying disability, the purchase price for shares repurchased under our share repurchase program were as set forth below as of June 30, 2019:  

Share Purchase Anniversary	Redemption Price
Less than 1 year	No repurchase allowed
1 year	$	8.44
2 years	$	8.66
3 years	$	8.89
4 years	$	9.12

During the six months ended June 30, 2019, we redeemed shares of our Class A and Class T common stock as follows:

	Class A				Class T
Period	Total Number of Shares Redeemed		Average Price Paid per Share		Total Number of Shares Redeemed		Average Price Paid per Share
January 2019		—		—		—		—
February 2019		—		—		—		—
March 2019		—		—		—		—
April 2019		—		—		—		—
May 2019		—		—		—		—
June 2019		16,914	$	8.66		28,087	$	8.61
		16,914				28,087

All redemption requests submitted in good order were honored for the six months ended June 30, 2019.

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ITEM 6.    EXHIBITS

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed April 11, 2016)
3.2	Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed November 2, 2015)
3.3	Articles of Amendment (incorporated by reference to Exhibit 3.3 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed June 28, 2017)
3.4	Articles Supplementary for the Class R shares of common stock  (incorporated by reference to Exhibit 3.4 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed June 28, 2017)
3.5	Articles Supplementary for the Class I shares of common stock (incorporated by reference to Exhibit 3.5 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed June 28, 2017)
4.1	Form of Subscription Agreement (incorporated by reference to Exhibit 4.1 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 8 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed April 27, 2018)
4.2	Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed November 2, 2015)
4.3	Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.1 to Pre-Effective Amendment No. 1 to Post-Effective Amendment No. 8 to the Company’s Registration Statement on Form S-11 (No. 333-207740) filed April 27, 2018)
4.4	Second Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed June 29, 2018)
10.1	Multifamily Loan and Security Agreement by and between RRE Summit Holdings, LLC and CBRE Capital Markets, Inc., dated June 24, 2019 (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S-11 (No. 333-231012) filed July 24, 2019)
10.2	Virginia Amended and Restated Multifamily Note by RRE Summit Holdings, LLC in favor of CBRE Capital Markets, Inc., dated June 24, 2019 (incorporated by reference to Exhibit 10.19 to the Company’s Registration Statement on Form S-11 (No. 333-231012) filed July 24, 2019)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Second Amended and Restated Share Redemption Program (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed July 24, 2018)
101.1	Interactive Data Files

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SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RESOURCE APARTMENT REIT III, INC.
August 9, 2019		By:	/s/ Alan F. Feldman
			Alan F. Feldman
			Chief Executive Officer
			(Principal Executive Officer)
August 9, 2019		By:	/s/ Steven R. Saltzman
			Steven R. Saltzman
			Chief Financial Officer
			(Principal Financial and Accounting Officer)

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